Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

BERKSHIRE COUNTY COUNCIL BILL [Lords]

To be read a Second time upon Thursday.

SAINT OSWALD ESTATE BILL [Lords]

Read a Second time, and committed.

Oral Answers to Questions — ROADS

Birmingham-South Wales (Improvements)

Air Commodore Harvey: asked the Minister of Transport what plans he has made for improving the main Birmingham-South Wales road; and when he expects to put them into operation.

The Parliamentary Secretary to the Ministry of Transport (Mr. Gurney Braithwaite): Surveys have been made and plans are being prepared for a new road in Worcestershire from near Droit-wich to Upton-on-Severn, a new road from Upton-on-Severn to Ross-on-Wye, including a by-pass to that town, and the improvement of the road, with diversions, between Abergavenny and Hirwaun. These works would all form part of the principal route from Birmingham to the Swansea area. Plans are also in preparation for a bridge over the Severn and a by-pass to Newport, which would enable traffic from the Swansea and Cardiff districts to join the Birmingham-Bristol road at Almondsbury. I cannot say when it will be possible to put these works in hand.

Air Commodore Harvey: While it is very satisfactory to know plans are being made, is my hon. Friend aware that his

answer is not wholly satisfactory because we are not told when they are to be implemented? Will he ask the Minister to try to give us some information about when the work will be put in hand, because it is important?

Mr. Braithwaite: As soon as funds are available.

Mr. G. Thomas: Is the Minister aware that we have been hearing talk about this matter for many years, but that it is considered by all the industrialists of South Wales that this matter is of considerable urgency if trading profits are to be improved?

Mr. Braithwaite: As the economic position of the country steadily improves under the present Administration talk will be superseded by action.

Construction and Maintenance

Air Commodore Harvey: asked the Minister of Transport how much money he expects to spend over the next three years in the construction of new roads and the maintenance of existing roads.

The Minister of Transport (Mr. Alan Lennox-Boyd): In the current financial year, up to £8,795,000 will be spent on maintenance and minor improvement work on trunk roads, and grants up to £17,930,000 will be payable to county councils for similar work on classified roads. For works of major improvement and new construction, commitments up to £806,000 on trunk roads and £2,352,000 on classified roads may be entered into this year, but only a small proportion of this will be spent on new roads. I cannot say what funds will be available to us for these purposes in the next two financial years.

Air Commodore Harvey: While appreciating that my right hon. Friend has this matter very much in mind, may I ask him also to bear in mind that as far as this country's immediate economic future is concerned new roads and better roads for Britain are just as important as developing A-bombs, and nuclear energy for industry, and will he give this matter his earliest consideration and do what he can to relieve existing problems?

Mr. Lennox-Boyd: I am very well aware of the high priority of these needs.

Air Commodore Harvey: asked the Minister of Transport how much money was spent on building new roads and effecting major improvements on existing roads during the years 1935–1939; and how much was spent in 1952.

Mr. Braithwaite: Figures of expenditure on public highways for the financial years 1935 to 1936 to 1938 to 1939 are contained in the Reports on the Administration of the Road Fund for the years 1936 to 1937, 1937 to 1938, 1945 to 1946 and 1948 to 1949. The latest figures available are for 1950 to 1951, Which are in the Report for the year 1951 to 1952. I am sending copies of these reports to my hon. and gallant Friend.

Air Commodore Harvey: Will my hon. Friend bear in mind that he has got out of this Question very easily?

Mr. Callaghan: Would the answer not have been much shorter if the hon. Gentleman had given us the figures?

Mr. Braithwaite: The figures are calculated in a very large number of ways, and I felt that my hon. and gallant Friend, who takes such an interest in these matters, would desire to study the Reports in detail, and possibly table another Question when he has considered them.

Mr. Harold Davies: asked the Minister of Transport how much a year for the next 10 years he intends, in accordance with his 10-year programme, to spend on British road improvements.

Mr. Lennox-Boyd: The 10-year programme outlined by the right hon. Member for East Ham, South (Mr. Barnes) in 1946 was deferred owing to the country's economic and financial circumstances. I cannot forecast what funds will be available for roads in the next 10 years.

Mr. Davies: Is the right hon. Gentleman aware that the County Councils' Association, when giving evidence to the Select Committee on Roads, said that we are now only maintaining roads at the rate of 70 per cent. of our pre-war maintenance, and is he also aware that all Governments in the last 40 years have collected every penny to the tune of £370 million a year from road users and that road users are getting back in Government grants about £33 million?

Captain Pilkington: Is not the hon. Gentleman very far seeing in suggesting that my right hon. Friend is going to be there for the next 10 years?

Mr. S. Silverman: Would the right hon. Gentleman consult the Prime Minister and see whether there is any hope of restoring the Road Fund to the purpose for which it was originally intended, since the money is provided by motor-car licences? Is it not a fact that the Prime Minister himself nearly 30 years ago diverted it from its proper purpose?

Mr. Lennox-Boyd: The hon. Gentleman knows very well that no responsible party leader, either on the Government or on the other side of the House, would say that Road Fund payments should be devoted solely to the roads. With regard to the other question which was put to me by the hon. Member for Leek (Mr. Harold Davies), it is regrettably true that maintenance has fallen. I think the generally accepted figure is some 15 per cent., and I can assure the House that I am deeply conscious of my responsibilities and am most anxious to be able to take some practical steps.

Safety

Brigadier Medlicott: asked the Minister of Transport if his attention has been called to the increase in road accident figures during the first three months of this year, especially those involving children; and what special measures he will take to draw public attention again to the need for continual vigilance and care on the part of all users of the roads.

Mr. Braithwaite: We are seriously concerned at the recent increase in road accidents and I should like to take this opportunity of making a further earnest appeal to all road users to keep constantly in mind the need for vigilance and care. It is obvious, and yet too often forgotten, that the behaviour of road users is a vital factor in road safety. The new Highway Code now under active preparation should help towards this end, and the Departmental Committee on Road Safety has recently set up a special sub-committee to co-ordinate, and advise on, road safety propaganda. The problem of child casualties is receiving special attention, and despite the general alarming increase, it is gratifying to note a


reduction of 12 per cent. in fatal casualties to children during the month of April.

Brigadier Medlicott: Is my hon. Friend aware—I am sure he is—that the figures for April at 18,000 show an increase of 1,200 on the figures for April last year and the figure for May is 21,000 accidents involving both killed and injured? Do not these figures show that there is hardly a national problem graver than this one? Will he summon all the resources, of Press, radio and teachers to see if a fresh attack can be made upon it?

Mr. Braithwaite: Yes, Sir, we are indeed very disquieted by the May figures, but I was pointing out that in the vital field of children there is at the moment an improvement.

Mr. Donnelly: Is not the real reason for the increase in casualties the fact that improvements to the roads are not keeping pace with the increasing volume of traffic on them? Is the hon. Gentleman aware that he and his Department may very soon be sharing the fate of public opprobrium that the Minister of Education is experiencing at the moment? Is not the real cause of the problem the unwarrantable selfishness of the Minister of Housing and Local Government?

Mr. Braithwaite: I am sure that hon. Members in general would deprecate very strongly road safety being brought into the party arena. During the time I have been in the House, all Governments have done their best to grapple with the problem, with support from both sides of the House.

Mr. Dodds: asked the Minister of Transport if he is aware of the public concern at the growing number of road accidents; and what plans the Government propose to introduce to meet this situation apart from road safety propaganda.

Mr. Braithwaite: Yes, Sir. Apart from propaganda and education, the principal lines of action are improvement of roads and traffic conditions and enforcement and strengthening of the law. As rapidly as economic conditions permit we propose to eliminate or improve accident black spots and subsequently to

embark on wider measures of road improvement and construction. We have been in consultation with my right hon. and learned Friend the Home Secretary about encouraging the more widespread use of motor cycle patrols, which we regard as a most valuable road safety measure, and he hopes shortly to take steps to this end. We shall take any possible legislative opportunity of improving and strengthening the Road Traffic law.

Mr. Dodds: While I appreciate that the Government seem to be going a little more deeply into the problem, can the hon. Gentleman state how he thinks any impression can be made upon this very serious situation without the spending of a little more money than is being spent at present?

Mr. Braithwaite: There are many methods. With wiser husbandry in previous years we might have been in a better position to spend the money now.

Mr. G. R. Strauss: Will the Parliamentary Secretary bear in mind that the large-scale educational campaign by Press and poster carried out by the previous Administration about five years ago appeared to have immense success, judging by the statistical results, and, although it costs money, will he consider embarking on another such valuable and important large-scale campaign?

Mr. Braithwaite: The right hon. Gentleman is correct. The campaign had valuable results, and it was continued last year when there was an overall reduction of 10 per cent. The campaign is still continuing and the casualties are rising, which shows that there are other elements in the matter. However, I agree with him that education and propaganda are highly important.

Sir T. Moore: Would it not be better again to consult the Home Secretary with the object of having severer punishments inflicted upon those who break the law in these matters?

Mr. Braithwaite: I have already said that we propose to strengthen the road traffic law when occasion offers.

Mr. J. Rodgers: asked the Minister of Transport (1) if he will bear in mind the findings of the Report on


the "Child on the Road," a copy of which has been sent to him, when the Highway Code is being redrafted;
(2) if he has considered the Report on the "Child on the Road," a copy of which has been sent to him, based on data supplied by his Department; how far he accepts the findings of the Committee; and if he will take steps to acquaint Road Safety Committees with these findings.

Mr. Braithwaite: The Report to which my hon. Friend refers, is being carefully studied within my Department and due regard will be paid to its findings in the preparation of the Highway Code and in road safety propaganda generally.

Mr. Rodgers: In view of the increase in casualties, in particular among cyclists, does not my hon. Friend feel that his Department should give consideration, firstly, to more propaganda among parents and, secondly, to the fact that cyclists should be required to take a test in the same way as motorists do and to show knowledge of the Highway Code? Does he not also agree that rear and front brakes should be required on all bicycles?

Mr. Braithwaite: My hon. Friend has asked me three supplementary questions. The Road Safety Committee have made certain recommendations to my right hon. Friend on the subject of bicycle brakes, and those recommendations are now before him. I certainly agree with the section of the report, to which he referred, dealing with child cyclists, which is of prime importance.

Mr. Snow: asked the Minister of Transport what system is used by his Department to allot funds for the specific purpose of removing dangerous conditions which may exist at traffic points where accidents have occurred or are likely to occur; and to what extent recommendations by local Road Safety Committees are referred to any Departmental section having funds at its disposal and which are separate from normal Departmental requirement funds.

Mr. Braithwaite: Highway authorities' proposals are submitted to us after consideration of the accident records and of any recommendations made to them by local Road Safety Committees. The only money at my right hon. Friend's

disposal for assisting road works comes from the grant in aid to the Road Fund which is expended in accordance with the estimates submitted to Parliament annually.

Mr. Snow: While I should like to have time to examine that reply, may I ask the hon. Gentleman whether he is aware that some Road Safety Committees are feeling extremely disappointed that time after time their recommendations are turned down because of the lack of funds at the disposal of the Ministry? May I further ask him if, in his analysis of the expenditure on road maintenance, he has examined the possibility of substantial savings where the maintenance of certain second and third-class roads are not dedicated by county authorities to subordinate local authorities?

Mr. Braithwaite: As regards the first part of the supplementary question, of course there is widespread disappointment when money cannot be found. The Road Safety Committees communicate with us through the highway authorities so we may not hear all the complaints. With regard to the second part of the Question, all these matters are borne in mind.

Mr. Crouch: asked the Minister of Transport what has been the percentage increase or decrease in road accidents in Great Britain during the first five months of this year compared with the first five months of last year; what are the comparable figures for the county of Dorset; and what are the figures for the areas served by the Shaftesbury and Gillingham, the Sturminster Newton, the Blandford and the Wimborne Road Safety Committees, respectively.

Mr. Braithwaite: Casualties from road accidents during the first five months of 1953 show a 9¼ per cent. increase over the corresponding period for 1952. This increase has been concentrated to an important extent in the larger cities and comparisons with rural areas with lighter traffic are misleading. The figures for Dorset where the numbers killed have unfortunately rather more than doubled, show a welcome overall reduction of 14 per cent. The figures are not separately compiled for areas covered by individual road safety committees.

Mr. Crouch: In view of the encouraging results from the county of Dorset, how can my hon. Friend justify the statement he made in this House a few months ago when he attacked the Bland-ford and Dorset County Council Road Safety Committees and said:
 both these bodies have been less active than many of their contemporaries and somewhat lacking in enthusiasm in this particular important matter."—[OFFICIAL REPORT, 12th March, 1953; Vol. 512, c. 1693.]
Will he now withdraw that statement?

Mr. Braithwaite: That was an Adjournment debate raised by my hon. Friend, on a subject dear to his heart— the control of dogs—and it dealt only with that subject. May I say that while I am glad that Road Safety Committees should get any credit which is going, it would be wrong to let it go out that the number of casualties is the yardstick of their efficiency or inefficiency. Some of our most active and keen Road Safety Committees are in the most congested areas where accident figures are highest.

Mr. Crouch: Is my hon. Friend aware that the figures for the Blandford Road Safety Committee show a fall of 20 per cent. in the first five months of this year?

Mr. Braithwaite: I am delighted to hear it.

Mr. Hargreaves: Would not the Parliamentary Secretary agree that there would be more encouragement to Road Safety Committees if his right hon. Friend ceased to encourage the industry to hope for an increase in the speed limit on heavy goods vehicles?

Mr. Braithwaite: I thought we had passed from that question.

Mr. Nicholson: Does it not put road accidents in a truer perspective if the figures of casualties are given as a proportion or percentage of the number of vehicles on the road?

Mr. Braithwaite: That is worthy of consideration.

Dr. Stross: asked the Minister of Transport whether he will make a statement on the number of road accidents since Coronation Day in London in those areas where traffic congestion has been most marked, giving comparable figures for 1952.

Mr. Braithwaite: Information as to road casualties since Coronation Day will not be collated for some weeks and could probably not in any case be given in the precise form desired by the hon. Member. I will, however, see how far I can meet his request.

Dr. Stross: In the meantime, has the Minister not noticed that the remarkable patience and diligence of the police must have prevented innumerable casualties and that we ought to be very grateful to them?

Mr. Braithwaite: I would heartily endorse that. So, indeed, has the immobility of the traffic in London.

A40, Carmarthenshire

Mr. Donnelly: asked the Minister of Transport what steps he is taking to resurface the A40 trunk road where it has been damaged by the laying of pipes between Whitland and Carmarthen.

Mr. Braithwaite: Work to make this road good is now in progress and will, I hope, be completed in about a month.

Mr. Donnelly: While I am delighted with that, will the hon. Gentleman at the same time have another look at the state of the road beyond Carmarthen towards London? People from Pembrokeshire are spending a small fortune in car repairs as the result of the conditions on this road.

Mr. Braithwaite: I have answered the Question on the Order Paper. If the hon. Member requires information about another road, perhaps he will put down a Question.

Mr. Donnelly: It is the same road.

Traffic Signals, Methley Bridge

Mr. A. Roberts: asked the Minister of Transport if he will take steps to have control lights installed on the bridge over the river Calder which connects the Rothwell and Castleford districts, Yorkshire.

Mr. Braithwaite: This is primarily a matter for the West Riding County Council, who are the responsible highway authority. They have not so far put forward any scheme for traffic signals at this bridge.

Mr. Roberts: Is the hon. Gentleman aware of the great public concern in this district through the failure of the West Riding County Council to interest themselves in this potential danger?

Mr. Braithwaite: If there is public anxiety it should be expressed through local representatives, but my right hon. Friend will look sympathetically at any plans put before him.

Staffordshire

Mr. Swingler: asked the Minister of Transport if he is aware that his reduction of the road maintenance grant to Staffordshire is causing the postponement of essential repairs and prolonging dangerous situations, an example of which has been brought to his attention by the hon. Member for Newcastle-under-Lyme; and if he will reconsider this decision.

Mr. Braithwaite: As the hon. Member was informed on 9th June, Staffordshire has received a fair share of the money available for road maintenance. I realise that this is less than would be desirable in more prosperous times, but I regret that my right hon. Friend is at present unable to increase the allocation.

Mr. Swingler: But the point is that maintenance has been cut. Is the Minister aware that road safety propaganda is no substitute for eliminating danger spots on the road, and is he prepared to reconsider a grant in this case if the members of the Staffordshire County Council put to him a number of really dangerous situations which cannot be covered by the present expenditure?

Mr. Braithwaite: Expenditure on maintenance does not cover black spots which are given special grants, but I will discuss with the hon. Member any individual cases he may have in mind in his constituency.

Mr. Harold Davies: Would the hon. Gentleman tell the House how he allocates a fair share of grants to the various counties, and has he some differential basis by means of which main highways from port to port and across country get bigger grants than counties that are off the main transport routes?

Mr. Braithwaite: Trunk roads are treated separately.

Upper Hulme Hill

Mr. Harold Davies: asked the Minister of Transport if he is aware of the dangerous nature of the A.53 Leek- Buxton Road at the Upper Hulme Hill and the high rate of accidents; and if he will make an additional grant to Staffordshire for road maintenance to enable the county authorities to carry out the urgent project on this road between Staffordshire and Derbyshire.

Mr. Braithwaite: I am aware of conditions on this hill. Staffordshire have been allocated a fair share of the money available for the maintenance and minor improvement of classified roads and are free to devote part of this to work on the hill. I regret that the funds now at my right hon. Friend's disposal do not enable him to approve for grant the scheme for a diversion submitted by the Council.

Mr. Davies: It is a shocking answer in view of the dangerous condition of this road, which is the main link between Stafford and Derby and between the East and West of the country——

Mr. Speaker: The hon. Member has not yet asked a supplementary question.

Mr. Davies: No, Sir, I am leading up to it. Is the Minister aware that Stafford is only asking from the Government something in the neighbourhood of about £9,000 to enable the county to make this area absolutely safe?

Mr. Braithwaite: I am afraid that more than £9,000 is involved in this, but we did suggest certain minor works which we felt would improve the situation and which could be met out of maintenance. The suggestion was not shocking but ameliorative.

Mr. Davies: In view of the unsatisfactory nature of the reply I shall raise this matter on the Adjournment.

Improvement Scheme, Deritend

Mr. Wyatt: asked the Minister of Transport on what grounds he has again rejected the application of the Birmingham City Council to proceed with the widening and reconstruction of Digbeth and High Street, Deritend, Birmingham.

Mr. Lennox-Boyd: Purely on economic grounds, Sir.

Mr. Wyatt: Is the Minister aware that Birmingham is an industrial city, and on purely economic grounds it is rather important for the country that it should be able to do its job effectively of creating an export trade? Is he also aware that it cannot do so while it relies on a road system built in the 19th century which has not been improved since, and that the place is being throttled purely on economic grounds by the failure of the Minister to do anything about it?

Mr. Lennox-Boyd: As I explained to the Lord Mayor and others who visited me, this is clearly one of the most important schemes in the Midlands and will rank very high, indeed, as soon as I have any funds available for major works of improvement generally.

Mr. Usborne: Will the Minister point out to the Chancellor of the Exchequer that when he asks the country economically to be more efficient and produce more goods, road widening schemes in general and this one in particular are, in a sense, regarded as extensions of the economic conveyor belt, and it is quite absurd to put capital equipment into factories if we do not improve the roads that take the goods away which are produced there?

Mr. Lennox-Boyd: I am in constant touch with my right hon. Friend, and occasionally I even use observations of that kind.

Crofter Counties

Lord Malcolm Douglas-Hamilton: asked the Minister of Transport if he can now say when work under the crofter counties road schemes will be resumed.

Mr. Lennox-Boyd: No, Sir. I can only say that the resumption of this work will be considered in relation to other claims on the Road Fund as soon as economic conditions are rather more favourable.

Lord Malcolm Douglas-Hamilton: Will my right hon. Friend give an assurance that because the Highlands are virtually at the end of the country they will not always come at the end of the queue when consideration is given to their roads.

Mr. Lennox-Boyd: Indeed, I can give that assurance, and I was at pains on Friday to impress on various Scottish local authorities the importance of the crofter county scheme.

A5 Junction, Muckley Corner

Mr. Snow: asked the Minister of Transport whether he will give personal attention to the local demand for a traffic roundabout at Muckley Corner, on A5, in Staffordshire, as demonstrated in the correspondence sent to him by the hon. Member for Lichfield and Tamworth.

Mr. Braithwaite: An improvement was carried out at this road junction some two years ago, and I do not think that the provision of a roundabout, which would involve extensive demolition of property, would be justified.

Mr. Snow: Is the Minister aware that he may be somewhat misinformed on the question of the demolition of this property, and will he not take into more serious consideration the recommendation of the local authority in question supported by its road safety committee?

Mr. Braithwaite: My information regarding the demolition of the property was that an hotel and garage were both involved, and that is a rather serious consideration.

Dartford-Purfleet Tunnel

Mr. Dodds: asked the Minister of Transport the annual cost of administration, maintenance of machinery and prevention of wilful damage to works in connection with the proposed Dartford-Purfleet Tunnel; and what is the total cost of maintenance since the works closed down in 1939.

Mr. Braithwaite: The cost in 1952–53 was £10,743. Since the work was suspended in 1939 the total costs incurred have been £102,000 for maintenance of the pilot tunnel and plant, £22,000 for engineers' fees and £5,000 for the Dartford Tunnel Committee's expenses.

Mr. Dodds: How much longer are we to go on spending this money without any return?

Mr. Braithwaite: I agree it is most unfortunate that these large sums have to be paid out annually. As the hon. Gentleman knows, the work was suspended in 1939. The Socialist Government decided that it could be recommenced in 1946 but, a year later, came to the conclusion that it would again have to be


postponed. We endorse that decision until such time as economic conditions improve.

Mr. Renton: Could my hon. Friend say whether, apart from the cost of maintenance, there is any loss due to deterioration in the condition of the Dartford-Purfleet Tunnel?

Mr. Braithwaite: Not without notice.

Mr. Dodds: The hon. Gentleman said before that economic conditions were improving under this Government. Can he not improve on the statement which he has just made?

Mr. Braithwaite: Not to the tune of spending £7 million on this one project.

Mr. Dodds: asked the Minister of Transport how much has been spent up-to-date in connection with the proposed Dartford-Purfleet Tunnel; and how much it is estimated on present-day values, that the land, pilot tunnel and preparatory work on the main tunnel is worth.

Mr. Braithwaite: The amount spent up-to-date on land and works is about £750,000; £100,000 has been spent on maintenance. I am advised that on present-day values the land, pilot tunnel and preparatory works on the main tunnel are probably worth about £1½ million.

Mr. Dodds: Does the hon. Gentleman realise the vital necessity of this provision if we are to get economic recovery? In view of the research which has gone on recently, is his Department willing to meet a deputation of business people and local authorities in order to discuss this problem?

Mr. Braithwaite: We are always prepared to meet deputations to discuss the subject, but I should not like the hon. Member to be given the impression that we are likely to proceed to spend £7 million on this one project.

Pedestrian Crossings

Mr. Russell: asked the Minister of Transport what progress has been made with the experiments in lighting Belisha beacons at pedestrian crossings.

Mr. Braithwaite: This is now past the stage of local experiment. Local authorities are proceeding to equip the beacons

with approved lighting mechanisms and the work will, I hope, be completed throughout the country by next winter.

Mr. Godfrey Nicholson: Are we to understand from that answer that the Department are securing uniformity in the application of these safety measures? Is not my hon. Friend aware that traffic signs and appliances generally apply with complete lack of uniformity in different parts of the country?

Mr. Braithwaite: We hope to get as much uniformity as we can in this matter of flashing beacons, and local authorities are being most co-operative.

Dr. Stross: asked the Minister of Transport whether he has noted that in rainy weather the surface of pedestrian crossings is not skid-proof; and whether alternative materials could be used, including coloured slabs of pottery.

Mr. Braithwaite: Several different kinds of material are used for marking zebra crossings and their resistance to skidding varies. The material most often used is a plastic which has a reasonably good resistance. Pottery tiles have been laid at some crossings (including some in Stoke-on-Trent) and their performance is being watched with interest.

Dr. Stross: Can the Minister say when he will have made up his mind about whether these crossings made of pottery slabs or bricks will be useful? When will he know whether they are going to be useful so that their use should be extended?

Mr. Braithwaite: I am tomorrow to have the pleasure of meeting the borough engineer of the City of Stoke-on-Trent on another matter and I shall take that opportunity of discussing it with him.

Barton Bridge, Eccles

Mr. Storey: asked the Minister of Transport if he is now able to authorise the start of work upon the approaches to the proposed bridge over the Manchester Ship Canal to by-pass Barton Bridge.

Mr. Lennox-Boyd: I regret that I am not yet in a position to make a statement on this subject. I will communicate with my hon. Friend as soon as possible.

Mr. Storey: As the matter has been under consideration for a very long while, will my right hon. Friend say how soon he will be able to make a statement?

Mr. Lennox-Boyd: I have shown my feeling about the importance of this problem by going to see it at 6 o'clock one morning. I will communicate as soon as I can.

Mr. Norman Smith: Will the right hon. Gentleman also expedite a decision in the case of the proposal of Nottingham City Council for a bridge over the Trent at Clifton, which would also save dollars?

Mr. Proctor: Is the right hon. Gentleman aware that any expenditure he makes will handsomely pay the nation because of the enormous cost of delays to the workers in Trafford Park as a result of hold-ups in this area?

Mr. Lennox-Boyd: I certainly think that in the fullness of time this will be a very desirable project.

Mr. Proctor: asked the Minister of Transport if he is now able to make a further statement regarding the traffic congestion at Barton Bridge, Eccles; and if he will arrange a meeting between the Manchester Ship Canal representatives and representatives of the Eccles Trades and Labour Council regarding the suggestions made for improving the position.

Mr. Lennox-Boyd: I am unable to make a further statement at present on traffic congestion at this bridge, but I will ask the Manchester Ship Canal Company to meet representatives of the Eccles Trades and Labour Council at a mutually convenient date.

Caithness and Sutherland

Sir D. Robertson: asked the Minister of Transport if he has considered the letter dated 13th June, addressed to the hon. Member for Caithness and Sutherland by the Secretary of the Royal Scottish Automobile Club, and forwarded to him; and why the main roads referred to on the north-west coast of Scotland are in such a state of disrepair.

Mr. Braithwaite: The responsibility for maintaining these two roads rests on the Sutherland County Council. We have allotted them a fair share of the grant money available for maintenance in the current financial year and they will no doubt devote this to the most essential work.

Sir D. Robertson: Is my hon. Friend not aware that the Sutherland County Council are quite unable to bear the cost of this work, and, as their main coastal roads are greatly deteriorating, will he put back on them some of the unemployed men who were working on them until recently and who then were paid off?

Mr. Braithwaite: In the case of one of the roads referred to in the letter from the Royal Scottish Automobile Club— A.894—I understand that the Sutherland County Council have made provision in the current year's programme for embarking on a certain amount of work, although not as much as they would like to do.

Oral Answers to Questions — TRANSPORT

Traffic Examiners

Mr. Renton: asked the Minister of Transport what steps are taken by his Department to ensure compliance with Section 19 of the Road Traffic Act, 1930, and Section 16 of the Road and Rail Traffic Act, 1933.

Mr. Lennox-Boyd: Enforcement of the provisions of these Sections forms part of the duties of the examiners appointed under Section 69 of the Road Traffic Act, 1930, and Section 17 of the Road and Rail Traffic Act, 1933. These officers are on the staff of the licensing authorities for goods vehicles and act under their direction. The approximate number of examiners engaged mainly on these particular duties averages about 120.

Mr. Renton: Is my right hon. Friend sure that 120 examiners is enough to perform these duties, bearing in mind all their other duties? Also, is the present strength of 120 examiners in accordance with the establishment laid down for his Department?

Mr. Lennox-Boyd: With regard to the second part of the supplementary question, driving traffic examiners and driving examiners perform other functions as well and no strict number is allowed for in my Department for this purpose. As to the second part of the supplementary question, at the moment the figure is adequate but we always keep it under review.

Mr. Ernest Davies: Would it not be desirable to increase the number in view


of the great increase in evasion which is taking place at the present time, which is inevitable because of the transport policy being pursued by the Government, there being an increase in competition leading to cut-throat competition?

Mr. Lennox-Boyd: That is not only hypothetical but quite inaccurate.

Committee of Inquiry

Mr. R. Harris: asked the Minister of Transport to what extent the London travelling public will be represented on the Board of Inquiry into London Transport.

Mr. Lennox-Boyd: I would ask my hon. Friend to await the announcement which I hope to make very shortly as to the composition of this body.

Captain Ryder: asked the Minister of Transport if he will now give the names of those who will serve on the Committee investigating London Transport problems; and when it is anticipated they will commence their inquiries.

Lieut.-Colonel Lipton: asked the Minister of Transport who will serve on the Committee of Inquiry into London Transport; why it has taken so long to set up this committee; and whether it has been asked to report by a certain date.

Mr. Lennox-Boyd: I am not yet in a position to announce the membership of the Committee, but I hope to make an announcement shortly. No date has yet been suggested for the Committee to report.

Captain Ryder: Will my right hon. Friend bear in mind that this is a matter of some urgency and we should like to see this Committee starting work as soon as possible?

Mr. Lennox-Boyd: Yes, Sir.

Lieut.-Colonel Lipton: Is the right hon. Gentleman aware that he has been saying "very shortly" for a very long time and that "shortly" has long since expired? Will he see whether the long delay lies in the fact that he has had a lot of refusals from people he has approached to serve on the Committee?

Mr. Lennox-Boyd: No, Sir, it is untrue. The hon. and gallant Member must not assume that every unworthy suspicion that enters his mind is true.

Improvements, North London

Mr. Ernest Davies: asked the Minister of Transport if he will now announce his decision in regard to development plans for travelling facilities in North London.

Mr. Lennox-Boyd: I regret that I am not yet in a position to make a statement on this matter.

Mr. Ernest Davies: Is the right hon. Gentleman aware that it is the fifth time that he has given that answer since 20th October last year, when he said that he hoped soon to make a statement? What does he mean by "soon"?

Mr. Lennox-Boyd: In the case of a scheme such as the London Plan, which is estimated to cost £340 million, some consideration is necessary.

Mr. Ernest Davies: Is the Minister aware that there have been announcements about certain works taking place, including the electrification of the South-end—Tilbury line? While the people in my constituency and in North London generally are waiting for his decision, other parts of the country are getting improvements.

Mr. Lewis: I do not represent the area referred to, but I have to travel in that area every day and can substantiate the views put forward by my hon. Friend. It is the view of everybody in North London that something should be done. Cannot the Minister do something, even if it is only of a temporary character?

Mr. Lennox-Boyd: I realise the anxiety of people in North London and I hope we shall in due course be able to do something about it, but the London Plan as a whole, of which this is an inextricable part, is such a formidable proposition that it would be unwise for me to make any definite statement at the moment.

Commission and Executives (Appointments)

Mr. Ernest Davies: asked the Minister of Transport if he will announce the names of those he has appointed as


members of the British Transport Commission and the Executives to fill the vacancies that will arise in August and September, respectively.

Mr. Lennox-Boyd: I have not yet made any such appointments.

Mr. Davies: Does the right hon. Gentleman consider it fair to members, whose term of office expires within two months in some cases, that he is still undecided whether they are to stay or are to be replaced? Does he also appreciate that, in view of the uncertainty within the British Transport Commission and Executive, there is inevitably deterioration in the morale of the staff?

Mr. Lennox-Boyd: I am fully conscious of the human problems involved. I am constantly in touch with the Chairman of the Commission about the matter, and I hope soon to be able to make a definite announcement.

Mr. Davies: In view of the excellence of the B.T.C. Report, will the right hon. Gentleman bear in mind the desirability of having some continuity and of retaining large numbers of the men who have done an excellent job during 1952?

Road Haulage Executive (Dissolution)

Mr. Callaghan: asked the Minister of Transport if he intends to abolish the Road Haulage Executive.

Mr. Lennox-Boyd: In view of the provisions of the Transport Act, 1953, it is clear that the Road Haulage Executive will have to come to an end and there would be some advantages in dissolving it at an early date. I hope to make an announcement on the subject very shortly.

North Scotland

Lord Malcolm Douglas-Hamilton: asked the Minister of Transport what general directions under Section 4 of the Transport Act, 1947, he has now issued to the British Transport Commission regarding the burden of high transport costs and the unsatisfactory state of railway services in the North of Scotland as a result of the deputation he received on this matter a year ago from the Inverness Chamber of Commerce, and of the recent communication from the Highland Advisory Committee of the Scottish Tourist Board.

Mr. Grimond: asked the Minister of Transport what general directions he has given under Section 4 of the Transport Act, 1947, for the implementation of the recommendations of the Cameron Committee on Transport in the Highlands and Islands.

Mr. Lennox-Boyd: None, Sir. None of the matters in question is appropriate to a direction under Section 4 of the 1947 Act.

Lord Malcolm Douglas-Hamilton: Is my right hon. Friend aware that, unless something is done to meet this difficulty of high transport costs in the North, not only will development be virtually impossible, but it will be very difficult to maintain life as it is?

Mr. Lennox-Boyd: I am aware of the particular problems of the Highlands and, as I have explained to my noble Friend and others, when the Commission produce their merchandise scheme, if in their view it does not provide adequately for conditions in the Highlands, there is recourse to the Transport Tribunal and, under the recent Act, there may be a measure nearer local autonomy in regard to charges.

Mr. Grimond: Can the right hon. Gentleman say whether he accepts the general findings of the Cameron Commission? If so, what action do the Government propose to take upon them?

Mr. Lennox-Boyd: As the Cameron Commission reported on action which must be taken by another authority, I think it would be inappropriate for me to give a decision.

Mr. Grimond: asked the Minister of Transport if he is aware of the situation facing many Scottish islands through the difficulties of transport; and if he will initiate an inquiry.

Mr. Lennox-Boyd: I am indeed aware of the importance of transport to the Scottish Islands, and I should be happy to examine, in concert with my right hon. Friend the Secretary of State for Scotland, any proposal that the hon. Member has of any practicable improvements in the shipping services.

Mr. Grimond: While I thank the Minister for that answer, may I ask him to treat this matter with some urgency, because many of these islands are being


depopulated through the high cost of transport and in certain cases there is a danger that the transport services might fail altogether?

Mr. Lennox-Boyd: Perhaps the hon. Gentleman will follow up my proposal. If, after that, it seemed desirable, I would refer the matter to the advisory panel on the Highlands and Islands.

Mr. G. R. Howard: If taxation is introduced on the Scilly Isles, will my right hon. Friend give an assurance that he will also look into any representations made by the Scillonians in connection with help of that sort to their steamship company?

Mr. Lennox-Boyd: I am always ready to receive any representations.

Harrow Train Accident

Mr. Nabarro: asked the Minister of Transport whether he will now make a statement on the causes of the Harrow train disaster which occurred in October, 1952; the remedial action he proposes to take; and the progress of trials for general application of automatic train control and signalling on British Railways.

Mr. Lennox-Boyd: The Report of the Chief Inspecting Officer of Railways on this accident, which is now in the hands of the printers, will deal at some length with its cause and the other questions which my hon. Friend has raised. I would ask him to await its publication at the end of the month.

Mr. Nabarro: Can my right hon. Friend say what progress is being made in this important matter of the trials being undertaken by British Railways between Barnet and Huntingdon? Will that be in this Report?

Mr. Lennox-Boyd: This is far too important a question to be discussed by question and answer. If my hon. Friend will await the publication of the Report, I think he will find there plenty to talk about.

Goods Vehicles (Speed Limit)

Mr. Nabarro: asked the Minister of Transport whether he will now make a further statement in connection with the removal of the 20 m.p.h limit on certain commercial road vehicles.

Sir W. Wakefield: asked the Minister of Transport what representations have been made to him by the manufacturers of goods vehicles as to the handicap imposed upon their ability to develop the export trade in such vehicles by the imposition of unrealistic speed limits upon them in this country; and what action he proposes to take in the matter.

Lieut.-Colonel Bromley-Davenport: asked the Minister of Transport whether, since statistics provided by the Road Research Laboratory show that the great majority of heavy goods vehicles at present by law limited to a maximum speed of 20 m.p.h. constantly travel at speeds in excess of that limit and that it has for long been impracticable to enforce the existing law, he will take steps to enable the operators of these vehicles, in the interests of efficiency, to re-arrange their route schedule times on the basis of a maximum possible speed of 30 m.p.h. and so remove the present waste to productivity through lost man-hours and idle vehicle-time.

Mr. Lennox-Boyd: As the House is aware, my predecessors and I have been strongly urged by representatives of the manufacturers and users of heavy goods vehicles to increase the speed limit for such vehicles from 20 to 30 miles an hour. This change has been powerfully argued both on the ground of economic use of resources at home and as an aid to the sale of vehicles abroad. While I am fully alive to the strength of these considerations, I do not think that action on my part to raise the speed limit can be fruitful and effective unless there is agreement in the industry as to the changes in existing arrangements which might follow. After careful consideration of the matter from this view point I have reluctantly come to the conclusion that the present time is not opportune for me to place the necessary regulations before Parliament for affirmative resolution.

Mr. Nabarro: My right hon. Friend referred to agreement in the industry; can he say what parties within the industry are opposed to these proposals? If so, can he help us as to what prospect he has of reaching general agreement in consideration of the fact that the matter has now been debated, with powerful support for the proposal, for more than three years?

Mr. Lennox-Boyd: I think that if there is to be agreement within the industry it would be as well for me not to specify the attitude of various parts of it.

Sir W. Wakefield: Is my right hon. Friend aware that his decision will mean increased unemployment in the heavy vehicle industry because of inability to increase exports? Will he bear this in mind when he reconsiders the situation, which I hope he will do at an early opportunity?

Mr. Lennox-Boyd: If that is the view of the manufacturing industry, including the workers in that industry, I hope that the workers in that industry will put that point of view before the workers in the operative side of the industry itself.

Mr. Lewis: Is the right hon. Gentleman aware that the men who have to drive these lorries and the unions that represent them will be very pleased with the answer he has given this afternoon?

Mr. Paget: Has the right hon. Gentleman ever met one of these vehicles which was actually going at under 20 m.p.h.?

Sir W. Wakefield: asked the Minister of Transport whether he is aware that under the present regulations a goods vehicle of 2½ tons unladen weight carrying a load of 9½ tons is permitted to travel at 30 miles per hour, whereas a vehicle of 4½ tons unladen weight but of more solid construction with better brakes and with a maximum permissible load of only 7½ tons is permitted to travel at no more than 20 miles per hour; and whether he will arrange to rectify anomalies of this kind at the earliest opportunity.

Mr. Braithwaite: I do not think that any one would attempt to drive a vehicle of 2½ tons unladen weight with a load of 9½ tons at 30 miles per hour or, indeed, at all. The particular anomaly to which my hon. Friend refers does not occur in practice.

Sir W. Wakefield: Does not the Parliamentary Secretary agree that there are anomalies of this kind? In the interests of road safety is it not highly desirable that these anomalies should be removed at the earliest possible opportunity?

Mr. Braithwaite: I think there may be anomalies, but not of the kind contained

in the Question. My hon. Friend will be aware that under Regulation No. 72 of the Motor Vehicles (Construction and Use) Regulations, 1951, it is an offence to carry a load the weight or distribution of which is unsafe or to use a motor vehicle for purposes for which it is so unsuitable as to be dangerous.

Oral Answers to Questions — SHIPPING

Oil Pollution

Brigadier Medlicott: asked the Minister of Transport how soon he anticipates receiving the report of the Committee appointed by him to examine the problem of pollution of coastal waters by oil.

Mr. Lennox-Boyd: I understand that the preparation of the Committee's Report is well advanced, and I expect to receive it at an early date.

Storm Damage (Docks and Harbour Losses)

Mr. D. Jones: asked the Minister of Transport whether he is in a position to indicate his policy in regard to grants of financial assistance to port and harbour authorities whose sea defences and equipment were severely damaged in the heavy floods of January last.

Mr. Lennox-Boyd: Dock and harbour authorities who incurred losses as a result of the January storm will receive financial assistance in so far as those losses were excessively heavy in relation to their resources.

Mr. Jones: While thanking the right hon. Gentleman for his observations, may I ask why it has taken his Department until 15th June to tell this authority that they would, in fact, receive some assistance? Is he aware that this authority is going ahead with the repairing of breakwaters and unless something is done speedily they will find themselves in financial difficulties?

Mr. Lennox-Boyd: I am aware that The Hartlepools put in a claim for something like £30,000 and other ports put in varying sums, but there were a number of details that had to be settled before it was possible formally to notify the dock and harbour authorities. I am sorry if it has taken rather long.

Mr. Jones: Can the Minister say if up to now a definite reply has been given to the Port and Harbour Authority at The Hartlepools.

Mr. Lennox-Boyd: The Dock and Harbour Authorities Association have heard formally from my Department.

"Princess Victoria" Loss (Inquiry Report)

Captain Orr: asked the Minister of Transport whether he will make a statement upon the Report of the inquiry into the "Princess Victoria" disaster.

Mr. C. Hughes: asked the Minister of Transport what action he proposes to take in view of the recommendations of the committee of inquiry into the loss of the British Railways' motor vessel, "Princess Victoria"; and if he will make a statement.

Mr. M. O'Neill: asked the Minister of Transport whether he has considered the findings of the tribunal set up by his Department to inquire into the loss of the motor vessel, "Princess Victoria," in the Irish Sea, on 31st January of this year, in which 133 lives were lost; and what action he intends to take against the owners in view of the findings of the tribunal that the loss of life was caused by the owners' default.

Mr. Lennox-Boyd: As the House will know, the main conclusion of the Court of Formal Investigation is that
"Princess Victoria" was lost because her stern doors were not sufficiently strong and because the car space was not adequately provided with freeing arrangements. Before the Court's Report was received the Railway Executive had been in consultation with my Department and had already taken steps to strengthen the stern doors in four comparable vessels and to fit improved freeing arrangements.
I am arranging for the Statutory Rules
which govern the provision of freeing arrangements to be examined in the light of the Report and if any changes in the Rules prove to be necessary they will be made. The Court's observations on matters connected with life-saving and rescue arrangements are also under examination. It is too early for me to say what the result will be.
The Report is also being very carefully considered by the British Transport Commission, who have, under the Merchant Shipping Acts, a right of appeal to the High Court.

Captain Orr: In view of the fact that this Report raises issues of extreme gravity, including the safety or otherwise of those who travel in British Railways ships, could my right hon. Friend say when hon. Members will have an opportunity of reading the full Report which, I understand, is not yet available, and can he also say whether he will represent to my right hon. Friend the Leader of the House that we should have a debate upon it at the earliest possible opportunity?

Mr. Lennox-Boyd: There are other Questions dealing with one of my hon. and gallant Friend's points, but in case they are not reached, and in view of the immense importance of the subject, may I say that I shall hope to publish the Report next week. I would publish it sooner were it not that one of the assessors has asked to make a fuller explanation of the reason for three of his qualifications. As soon as those are received, they will be printed along with the Report. On the question of a debate, of course it is not for me, but I would point out that the British Transport Commission have 21 days from the publication of the Report, or 28 days from the pronouncement by the Court of its decision, to make up their minds on the question of an appeal. During that period it would clearly not be debate-able, though it is not for me to say.

Mr. Shinwell: In view of the criticisms levelled against the British Transport Commission in the newspapers and elsewhere, does not the right hon. Gentleman recognise that the major responsibility for ensuring that vessels proceeding to sea are seaworthy rests upon his own Department, which now undertakes the functions formerly vested in the Mercantile Marine Department of the Board of Trade?

Mr. Lennox-Boyd: Clearly I have a considerable responsibility in this matter. The certification of passenger ships is my responsibility, though the load line regulations provide, as the right hon. Gentleman knows, for reference to Lloyds,


should the Commission so decide, as indeed they did. The question of freeing ports was fully discussed in my Department many months ago and, on what seemed to be the best evidence available, was rejected. In so far as this had a bearing on the disaster I have a responsibility, but this may well come up with other matters before another court should such action be taken by the Commission.

Mr. O'Neill: Is the Minister aware that there is considerable uneasiness among the travelling public in Northern Ireland over the findings of this Report? Is he also aware that the local labour union in Belfast and the National Lifeboat Institution incurred considerable expense at being represented at these inquiries, and would he agree that some remedy should be found for compensating these people for the costs they have undertaken in the public interest?

Mr. Lennox-Boyd: There is a question down on that very point.

Mr. E. L. Mallalieu: Would the right hon. Gentleman consider, having regard to the gravity of the issues raised by this Report, placing a copy of the minutes of the evidence in the Library?

Mr. Lennox-Boyd: I will consider that.

Sir D. Savory: Has the Minister already taken action on the recommendation that there should be a responsible superintendent at one of the terminal ports, either at Larne or Stranraer, because this would certainly go far to prevent further accidents in the future?

Mr. Lennox-Boyd: I hope I shall be forgiven if I answer my hon. Friend at greater length than is normal on a supplementary question in fairness to all concerned. Prior to 1948 there was a steamship manager at Gourock who reported to Euston. In 1948 Stranraer was placed under the Marine Superintendent, Glasgow. In March of last year, 1952, the full control of steamships was changed from Glasgow to Euston, but the technical services of a superintendent engineer at Gourock were made available to vessels at Stranraer. It was also then decided to put a district marine manager at Stranraer but this post, which has now been filled, had not been filled at the time of the disaster.

Mr. Callaghan: May I ask the Minister if, when he is publishing the White Paper, he will consider including in it any reports made by the Ministry of Transport's ship surveyors on the condition of this vessel?

Mr. Lennox Boyd: I will certainly look into that.

Mr. C. Hughes: asked the Minister of Transport if, in the light of the Report of the committee of inquiry into the loss of the British Railways vessel, m.v. "Princess Victoria," he will give an assurance that all vessels operated by British Railways are in all respects seaworthy.

Mr. Lennox-Boyd: The responsibility for seeing that vessels go to sea in a seaworthy condition rests primarily with owners and masters. Passenger
ships operated by the Railway Executive are surveyed by my Department for passenger and safety certificates, and I am satisfied that they comply with the requirements of the Regulations. As regards the other
vessels which are operated by the Executive, some of them are surveyed by my Department and others by Lloyd's Register of Shipping. There is no reason for thinking that the vessels operated by the Executive are not in all respects seaworthy.

Mr. Hughes: In view of what we have heard already, can the Minister give the House a definite assurance that all British Railways vessels, especially prototypes of the "Princess Victoria," shall be in all respects completely seaworthy?

Mr. Lennox-Boyd: The Transport Commission issued a fairly full statement on the steps taken in regard to comparable ships, and I do not think I can add to that.

Mr. G. R. Howard: Bearing in mind what my right hon. Friend has said about life-saving, will he bear in mind the recommendation, about which I have already written him, as to the advisability of self-propelled lifeboats in shallow draft vessels of this sort?

Mr. Lennox-Boyd: Yes, I most certainly will.

Mr. E. L. Mallalieu: asked the Minister of Transport when copies of the


Report of the inquiry into the loss
of the m.v. "Princess Victoria" will be available to hon. Members.

Mr. Lennox-Boyd: The Report of the Formal Investigation into the loss of "Princess Victoria" will be printed by about the middle of next week. I have arranged for copies to be made available to hon. Members at the Vote Office.

Inquiry Costs

Mr. M. O'Neill: asked the Minister of Transport whether he will introduce legislation to enable the chairmen of the inquiries set up by him to award costs and to recompense organisations who, in the public interest, are represented at such inquiries.

Mr. Lennox-Boyd: I assume that the hon. Member is referring to Courts of Formal Investigation into shipping casualties. The Rules which govern
the procedure to be followed by these Courts provide that a Court may order the costs and expenses of the investigation to be paid by my Department or by any other Party. There is therefore no need for further legislation.

Oral Answers to Questions — KOREA (ESCAPE OF PRISONERS OF WAR)

Mr. A. Henderson: asked the Prime Minister if he will now state what steps are being taken by the United Nations authorities in Korea to prevent the further release of North Korean prisoners of war except in accordance with the recently signed agreement at Panmunjom.

Mr. Donnelly: asked the Prime Minister if he will make a further statement on the Korean truce talks.

The Prime Minister (Sir Winston Churchill): Since the answer is rather long, I will, with your permission, Sir, and the indulgence of the House, make a statement at the end of Questions.

At end of Questions—

The Prime Minister: With permission, I will now make the statement in answer to Questions Nos. 46 and 48.
A meeting of the principal negotiators was held at Panmunjom on 20th of June. The Communists handed over a letter from their two Commanders-in-Chief

addressed to General Mark Clark. This communication made a number of observations about the recent escape of Korean prisoners and asked several questions. The United Nations Command are now considering this communication.
The details of this deplorable occurrence are now well known. Since the major events on 18th of June there have been break-outs on a smaller scale at other camps. The latest information available to me, which is necessarily approximate, is that out of about 33,000 North Korean prisoners likely to be placed in the custody of the Neutral Nations Repatriation Commission after the conclusion of an Armistice some 8,000 to 9,000 remain in the camps. These are now under United States guard.
Nothing could be further from the truth than to allege, as has been done, that the United Nations Command have connived at these happenings. The United States Government have publicly announced that they regard the action taken by the Government of the Republic of Korea to be in violation of the authority of the United Nations Command to which the Republic of Korea had agreed in July 1950. They assert that on behalf of the United Nations they have conducted the negotiations for an Armistice in good faith and have acted in good faith. President Eisenhower has communicated with President Syngman Rhee in this sense.
The views of Her Majesty's Government have been made known to the Government of the Republic of Korea in the following note of protest which Her Majesty's Minister has delivered to that Government today:
1. Her Majesty's Government have been shocked to read the statement of the President of the Government of the Republic of Korea of the 18th of June in which he stated that he ordered, on his own responsibility, the release of certain Korean prisoners. They have noted with deep concern the consequent escape of thousands of these prisoners from a number of camps under the United Nations Command.
2. As a member of the United Nations, whose military forces are participating in the Korean action, Her Majesty's Government strongly condemn this treacherous violation of the authority of the United Nations Command to which the Government of Korea had agreed in 1950. Moreover, Her Majesty's Government understand that during recent weeks the Government of the Republic of Korea have actually reaffirmed this position by assurances


to the United Nations Command that no unilateral action of this kind would be taken by them.
3. Her Majesty's Government are anxiously watching the course of events which are fraught with serious possibilities. Unless there is a Government in the Republic of Korea which will co-operate loyally with the United Nations Command, the security and welfare of its people, as well as all the gains which have been made by the sacrifice of so many, including the gallant Republic of Korea Army, will be jeopardised.
The United Nations Command are thus confronted with grave and serious problems. We remain in the closest touch with the United States Government and Commonwealth Governments. The House will not expect me to take this matter further today while difficult negotiations and consultations remain in progress, but I shall be glad to make a further statement as soon as I am in a position to do so.

Mr. Henderson: Has the Prime Minister's attention been drawn to the further statement of President Rhee to the effect that, even if there be a truce, he and his Government will carry on the war in Korea? May I ask him if he will again reaffirm that it is the unchangeable policy of Her Majesty's Government that this fighting should be brought to an end as soon as a proper truce agreement is arrived at; and although President Rhee expects to receive moral and material support from the Allies, even if he carries on the war on his own, that the aid being given by this country is limited to the war carried on under the auspices of the United Nations and not for the purposes of the South Korean Government alone?

The Prime Minister: That raises all sorts of complicated issues. For a long time the United States have been doing their utmost to strengthen the South Korean Army in order to relieve the very heavy burden which has fallen upon themselves. The problem there is one really of a most serious character and full of danger, and we have to be very careful in making statements which perhaps would not take fully into consideration the difficult issues involved. But we are absolutely resolved to act in good faith, and we have the fullest agreement with our great ally across the ocean on that aspect.

Mr. Attlee: Is it not a very serious feature of these events that action seems

to have been taken by the Government of Korea in a sphere in which one would have understood the whole of the operations were under the Supreme Military Commander? It is rather disturbing that after the major escape these other escapes should have continued, which seems to show a great lack of discipline on the part of the South Korean forces who are, presumably, an integral part of the United Nations Forces operating there?

The Prime Minister: I am not so sure it is a great lack of discipline. It may be a highly particularised form of secret, and, as I hold, treacherous action. The United States have a very heavy burden to bear and they had moved, in the course of the last year, about 13,000 of their troops from guarding the prisoner cages to holding the line—which are not too many men—and this has led them, under every kind of honourable assurance, to entrust a large proportion of these duties to South Korean troops, who have, on this occasion, in my opinion, misconducted themselves, but under the orders of their own Government. The matter is obviously very serious. We cannot cast away the whole fruits of these years of fighting and ask the Americans, and so on, and our own people, who shed their blood, to treat it as if it were nothing. It seems to me that great firmness should be shown and very close contact between the United Nations partners who have actual combatant forces in the field.

Mr. Donnelly: Will the Prime Minister accept that there is support from all parts of the House for the very strongly worded protest he has delivered? In saying that, may I also ask if the attention of the right hon. Gentleman has been drawn to the Press reports that President Rhee is now seeking to recruit some of these escaped prisoners into the South Korean Army? Without going too far into that, would the right hon. Gentleman at least agree that the United Nations Command should not accept the support of these troops in the South Korean Army, and that the United Nations Command will act vigorously by taking these troops from the South Korean Army and putting them back in the prison camps?

The Prime Minister: I should think that that was a very sensible line of action.

Miss Lee: Is the Prime Minister aware that, no matter how strongly worded a protest may go to Mr. Syngman Rhee, there will still be a great deal of world opinion baffled by the failure of the intelligence service—we are included, but America has had the main burden—and in those circumstances would the right hon. Gentleman go further than making a protest? Will he ask for a commission of inquiry to find out how this treacherous act took place, hoping that in the course of the inquiry it will be made absolutely clear that no American, British or other personnel were involved?

The Prime Minister: This matter has been mentioned in the United States. I really think that we must place our confidence in them. They are very likely to examine the details of the precautions taken and the efficiency of their intelligence, but I cannot feel that we ought to intervene on that aspect when so many other matters, on which we have a greater claim to be heard, press for attention.

Mr. Usborne: Can the Prime Minister assure the House that it is not now the view of Her Majesty's Government or of the United Nations that Korea can or should be united by force? Can he give us that assurance, because it was not long ago that the Foreign Secretary said that the original intention of the United Nations, that Korea should be unified, still stood?

The Prime Minister: I think the words "by force" were not included. There was an idea that when there was a settlement, as we hoped there would have been by now and as there would have been but for this act of bad faith, then the United Nations and the United States would help to build up the ruined, shattered area of North Korea and in so doing would try to bring about by peaceful methods the unity of that body, but we have not committed ourselves, that I am aware of, in any way, to go forward and conquer the whole area of Korea and place it under the authority of Mr. Syngman Rhee.

Mr. S. Silverman: Has the attention of the right hon. Gentleman been called to General Mark Clark's explanation that he did not take any steps to prevent the escape of which there had been a

rumoured intention, because he relied absolutely upon the assurances he had received from Mr. Syngman Rhee that there was no such intention? Having regard to the fact that these assurances proved absolutely worthless, will the right hon. Gentleman say what steps would be taken to make sure that if an armistice were now signed on further assurances of that kind, there were no breaches of them?

The Prime Minister: It has been a great strain keeping all these troops in action all the time, and I can quite see why it was thought better to put these extra 13,000 Americans in the line. Now we do not know quite what will happen. It might be that reinforcements would be needed in Korea in order to enforce a policy of peace and good faith.

Mr. Paget: However much one may deplore the action of the South Korean Government, does not the action of these prisoners themselves, coupled with the events in Berlin, throw an interesting light on the popularity of Communism? Further, why were not these people allowed to escape 12 months ago when it would have involved no breach of faith?

The Prime Minister: The question of the popularity of Communism is one which, no doubt, could be discussed with great freedom in all parts of the House, but the balance of opinion, I believe, would lie on its growing unpopularity. I think that we would complicate any discussions on that subject which might take place by trying to mix up what has happened in Korea with what has recently happened in Berlin.

Mr. Noel-Baker: I do not ask the Prime Minister to go further than he has gone today while negotiations are going on, and I do not ask him for an answer to what I am going to say, but I should like to ask if he will consider whether, if an early truce should not happen owing to the action of the Korean Government, he will propose to the President of the Assembly of United Nations that he should summon a meeting in order that the South Koreans may understand the opinion of the other members who are all vitally concerned and in order that the Korean people may know that they have no support from world opinion?

The Prime Minister: That is a very thoughtful and lucidly expressed question, and it falls to me to express my gratitude to the right hon. Gentleman for the fact that I do not need to give him an answer.

Oral Answers to Questions — MILITARY AUTHORITIES, ASIA (LIAISON)

Mr. Wyatt: asked the Prime Minister the machinery for liaison between the British, French and American military authorities in Asia, outside Korea.

The Prime Minister: Regular contact is maintained in the Far East on military planning matters between the three Powers mentioned and Australia and New Zealand. Meetings of their military representatives take place whenever needed.

Mr. Wyatt: Can the Prime Minister say whether these meetings are merely for the exchange of information or do they keep up a regular exchange of liaison on military matters with regard to possible eventualities in South-East Asia?

The Prime Minister: Yes, Sir, I think the second of the two alternatives mentioned by the hon. Member is in fact operative.

Oral Answers to Questions — HOUSE OF COMMONS CATERING

Mr. Murray: asked the hon. Member for Woolwich, West (Mr. Steward) as Chairman of the Kitchen Committee, why the tea served in the cafeteria downstairs is twice as good as the tea served in the Members' cafeteria upstairs; and if he will endeavour to serve Members with the same quality as at present served downstairs.

Mr. Steward: The quality of tea served in the Members' Tea Room is the same as is served in the Cafeteria. I will, however, look further into the matter and endeavour to remove the cause of the hon. Member's complaint.

Mr. Murray: Is the hon. Member not aware that there has been a series of complaints for a long time? If the quality is the same, the quantity is certainly not put in the pot.

Mr. Steward: I was not aware that there had been any complaints whatever. I will, however, look into the matter.

Oral Answers to Questions — MINISTRY OF SUPPLY

Guided Missiles (Development)

Mr. A. Henderson: asked the Minister of Supply how far the guided bomb which is being developed is designed to be capable of hitting the target at any time, from any height, and in any weather.

The Minister of Supply (Mr. Duncan Sandys): As far as possible.

Naval Aircraft

Captain Ryder: asked the Minister of Supply what steps he is taking to improve the supply of up-to-date aircraft to the Fleet.

Mr. Sandys: Some while ago my right hon. Friend the First Lord of the Admiralty and I had the organisation for the ordering and producing of naval aircraft examined. As a result, some improvements in methods are being introduced.

Captain Ryder: Will my right hon. Friend bear in mind that something considerably more is needed if the Fleet Air Arm is to be brought up to date?

Captain Ryder: asked the Minister of Supply the descriptive number or name of the new twin-jet swept-wing fighter being produced for the Fleet Air Arm; and what is its present state of progress.

Mr. Sandys: I would refer my hon. and gallant Friend to the reply given to him on 6th May by my right hon. Friend the First Lord of the Admiralty.

Captain Ryder: As the First Lord of the Admiralty was unable to answer the Question, I would ask my right hon. Friend to consider whether he can enlarge on the reply he has just given?

Mr. Sandys: My hon. Friend will not expect me to give details about an aeroplane which is still in the development stage. The development and preliminary production plans are proceeding satisfactorily and, in order to accelerate this project we have given it super-priority.

BILLS PRESENTED

MARSHALL AID COMMEMORATION BILL

"to make provision for the granting of scholarships in commemoration of the assistance received by the United Kingdom under the European Recovery Programme and known as Marshall Aid; and for purposes connected with the matter aforesaid," presented by Mr. Anthony Nutting; supported by the Prime Minister, Mr. Eden, the Chancellor of the Exchequer and Miss Florence Horsbrugh; read the First time; to be read a Second time upon Thursday, and to be printed. [Bill 96.]

NEW TOWNS BILL

"to increase the amount of the advances which may be made to development corporations under section twelve of the New Towns Act, 1946," presented by Mr. Harold Macmillan; supported by Mr. J. Stuart, Mr. Boyd-Carpenter and Mr. Marples; read the First time; to be read a Second time upon Thursday, and to be printed. [Bill 97.]

Orders of the Day — FINANCE BILL

Considered in Committee [Progress, 17th June].

[Sir CHARLES MACANDREW in the Chair]

Clause 32.—(PROVISIONS AS TO PERMANENT ANNUAL CHARGE FOR THE NATIONAL DEBT AND AS TO THE OLD SINKING FUND.)

Motion made, and Question proposed, "That the Clause stand part of the Bill."

3.46 p.m.

Mr. Douglas Jay: This is an important Clause in the Finance Bill. It so happens that at no other stage of the Bill do we examine the question of Government expenditure. Every other Clause, of course, is wholly concerned with taxation. I think it is no bad thing that at one stage in the Finance Bill we should give our minds for a time to the question of expenditure as well as of taxation. It is, after all, the shadow, as it were, of Government expenditure which leads to all taxation which we talk about for the whole of the rest of the proceedings.
The expenditure contained in this Clause is a very large item in the total. The figure is £615 million and that is a considerable part of our total expenditure. It is actually 50 per cent. greater than the expenditure on the National Health Service. It is more than twice our expenditure on education. It is actually more than the total expenditure out of the National Insurance fund, and incidentally it is almost exactly equal to the total revenue from the Tobacco Duty.
Indeed, it is still true that our total expenditure on the National Debt and defence together are equal to about one half of the total spending in the whole Budget. Moreover, the expenditure on the Debt has very materially increased in these last two years. There was an Amendment on the Paper which, as it happens, has not been called, in which we sought to substitute in page 33, line 12, the figure of £535 million for the £615 million contained in the Bill. The significance of that figure—I hope I may just mention this—is to draw attention to the fact that two years ago the figure


corresponding to this one of £615 million was £535 million. That has been the increase in expenditure over the last two years.

Mr. F. Beswick: On a point of order. I wonder whether it would be possible to reduce the number of private meetings now going on in the chamber?

The Chairman: I beg the hon. Gentleman's pardon; my attention was distracted for a moment.

Mr. Jay: I am sure that, as time goes on, the atmosphere will quieten, as it usually does.
I was about to ask how much, in fact, the Chancellor's new policy of higher interest rates has cost us over these last two years. I ventured to give the estimate in the very first week of this Government's life, when the Chancellor announced the first increase in the Bank rate, that the higher interest rates which he was then initiating would, in the end, cost more than all the reductions in administrative expenditure which he proposed to make.
The Chancellor himself, in his Budget speech, made a remark on this question
which seems to me to be highly misleading. He was talking about expenditure in the last Budget year—1952–53—and he said:
Expenditure on Consolidated Fund Services was £667 million, an increase of £42 million on the Budget estimate. The principal reason is, of course, the higher level of interest rates, particularly on our short-term borrowings, which followed the rise in Bank rate from 2½ to 4 per cent."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 39.]
The Chancellor said that the £42 million was not a negligible figure, but rather less than what he called the somewhat imaginative figures which had been suggested from time to time. I thought that that remark which was a calculated statement in the Budget speech, would have misled any inattentive listener into thinking the £42 million was the measure of the increase in the expenditure on the National Debt due to the Chancellor's policy. But, of course, it is not that at all. What he was talking about was the amount by which actual expenditure in 1952–53 exceeded the estimate for that year; and that figure measures nothing at all except the inaccuracy of the estimate which the Chancellor had made at the time of the 1952 Budget. It shows that he was not able to foresee clearly

the effect of the change which he was then making.
We do not get the true measure of the increase due to the change in policy, even if we compare the actual expenditure in 1952–53 against the actual expenditure in 1950–51 and 1951–52. It was, of course, in November, 1951, that the first rise in interest rates was made, and the second was about the beginning of 1952; so that some of it was already included in the year 1951–52. If we ignore for a moment the Sinking Fund charge, which is included in the figure in this Clause, and if we look simply at the figure for debt interest, it is quite clear that the truest measure which an outsider, with the aid of published figures, could get of the rise in interest rates consequent on the change in policy would be to compare the estimates for debt interest in 1951–52 with the estimate in the present year 1953–54.
I do not think that the Financial Secretary would disagree with that method of argument. I do not take the previous year—1950–51—because it did not include the interest on the American and Canadian debt, which is in no way due to the policy of this Government, but which was included in the figure for 1951–52.
If we make the comparison in that way, we find that the rise in the interest bill has been from £515 million in 1951–52 to £580 million, which is the estimate for the present year. That increase is not one of £42 million, but one of £65 million. I do not say that that is precisely the right figure to the nearest £100,000, because, no doubt, there have been conversion operations and changes in the total of the Debt, and so on. I should think that the true figure would be rather higher, but the figure I have given is substantially correct.
It follows from that, therefore, that the effect has turned out as I ventured to predict—that the increase in the expenditure on the Debt has exceeded all the administrative savings in Government expenditure which the Chancellor has been able to make in these last two years. The right hon. Gentleman claimed in 1952–53 that he was going to make savings of £50 million, but, in fact, he failed to do so. This year, he claimed a total saving of between £60 million and £70 million, but practically the whole of that, as far as I have been able to make out, and the


Chancellor has not denied it, can be accounted for by reductions in the holdings of stocks by the Ministry of Food.
Therefore, we discover the remarkable fact that the increase in debt interest indicated in this Clause has greatly exceeded all the genuine savings in expenditure which the Government have been able to make in these two years. It is partly because of this rise in debt interest and partly because of the admitted rise in defence expenditure that the total of Government expenditure above the line today is about £200 million higher than it was two years ago, and I think that that is a fact which, whether hon. Members like it or not, we should bear in mind throughout our discussions on both taxation and expenditure.
It is also the fact, of course, that part of this extra £65 million which has been paid on debt interest is a burden not merely on the Budget but also on our balance of payments. Perhaps the Financial Secretary can tell me what it is, because I have heard it stated at something like one-third, for, obviously, quite a proportion of the short-term debt is held by banks and Governments in the sterling area in the shape of the sterling balances that we talk about, and, to that extent, the rise in interest rates has become a burden on our balance of payments as well.
Nor should we forget that this increase has been made in payments which go to financial institutions of one kind or another at the same time, and in the same two years, as the Government imposed charges in the National Health Service, made large cuts in food subsidies, and, finally, carried out a campaign of economy in education which we shall no doubt discuss at some other time.
The Chancellor, I am sure, would not dispute any of these figures. He would argue that all this has been worth while, because of some economic effect which it has produced. We have never been told very clearly just what it is that the higher interest rate policy is supposed to have done. We have never had explained just how it is supposed to have worked. Perhaps the Government may explain today, but both the Chancellor and the writers in the financial Press who defend this policy always take refuge in metaphors and vague generalisations about it.

If only for that reason, perhaps I might make clear very briefly what is our attitude to this question of interest rates policy.
We have never been opposed to a rise in interest rates—we have said so very often—if it can be shown that it will have a useful and desirable effect. But presumably, the purpose of a rise in interest rates is to influence the borrower, and it seems to me that that must mean in practice to restrain the private borrower, whether private industry, a private person or whoever it might be. For it can hardly be argued that the Chancellor had to restrain himself by charging himself higher interest rates in order that he should spend less. The rise in interest rates, so far as it was justified, could have restrained the private section of the economy, if it was thought that it was showing an inflationary tendency, while making no rise in the rates for Government borrowing. If that had been done, we should have been saved something like £65 million for the taxpayer.
4.0 p.m.
I know that hon. Members will argue, though it has never been explained how, that it would have been impossible for the banking system to exert a restraining influence on the private borrower unless it was being given this enormous inducement by the Government. It always seems to me very unfair to the banks to suggest that it was necessary to hand them this large bribe in order that they should be restrained in their lending and exert that restraining influence on the economy which the Government wished. I do not believe that that is true.
I believe that it is obviously possible for the banks to do that in response to a request in the national interest, and that it is possible for them to do it without their being handed this large sum of money. I also believe that if the request had been made to the banks to act in that respect in the national interest, to exert the necessary restraining influence on grounds of public policy and in response to a request from the Chancellor, we would have had no need to fear that they would not have acceded to it.
If that is so, the whole of this enormous increase in public expenditure and the burden on the taxpayer could have been


avoided. We feel that no case has been made out. We believe that this is perhaps the most significant example in the whole field of public expenditure at the present time of outright waste and enormous expenditure of public money to no purpose and of a very large increase in expenditure over these last two years. We cannot, therefore, give our approval to the inflated figure in this Clause.

Sir Edward Boyle: In the course of his interesting speech the right hon. Gentleman the Member for Battersea, North (Mr. Jay) managed to avoid reciting two facts which I can well understand he wished to forget. The first was that in the corresponding Clause in the Finance Bill last year, he estimated the rise in the Treasury bill rate to 2¼ per cent. would cost the taxpayer £80 million. The second fact was that, according to the financial statement for 1953-54, the total rise in debt interest, so far from being £80 million was, in fact, something like £36 million. I can quite understand that an error of rather more than 100 per cent. in the right hon. Gentleman's estimate was something to which he did not want to draw attention again this afternoon.

Mr. Jay: I maintain that before we have the final result of Government policy it will rise to that level.

Sir E. Boyle: A whole year has gone by since the debate on that Finance Bill and the right hon. Gentleman's expectations have not been borne out so far. In view of the charge made in this year's Budget debate against the Chancellor's incorrect Budget estimates last year, the Committee should realise that those errors were by no means confined to one side, and none was as great as the error which the right hon. Gentleman the Member for Battersea, North made on 27th May last year.
I do not want to delay the Committee because there is such a lot of business to be done; but I want to say that I believe that the present Government's monetary policy has been one of the most important features of the Government's policy. Indeed, it has had all the good effects that we claimed for it, but not the bad effects which hon. and right hon. Gentlemen opposite foretold.
All the aspects of the Government's monetary policy were equally important.

The funding operation, the rise in the Bank rate and the policy of ceasing to peg the Treasury bill rate all helped to damp down inflationary pressure. The curbing of inflation not only helped the financial situation, but also strengthened the whole moral basis of Government in this country. Indeed, I believe that the conquering of inflation this last year was one of the most important achievements of the present Government since they assumed office. If inflation was to be conquered it was vital to cease pegging the Treasury Bill rate through the activities of the special buyer.
I do not always agree with the Chairman of Lloyds Bank in his annual report and, if I may say so, I think that his annual statement last year was more convincing than that which he made this year. But I think that he was absolutely right at the beginning of 1951 when he pointed out that, through ceasing to peg the Treasury bill rate it would at last be possible to regulate the base on which the whole pyramid of credit is erected. This policy was well worth the cost of an extra £40 million to my right hon. Friend, who was able to produce a hopeful Budget and to give away a good deal of money, only because inflation had been conquered and because the volume of business savings was so much greater than had been expected. The policy of ceasing to peg the Treasury bill rate has been cheap at the price and we ought not to pass from this Clause without pointing out that this price has been very much cheaper than hon. and right hon. Gentlemen opposite expected it to be.

Mr. John Strachey: The issue on this Clause is that the Chancellor has used the Bank rate and other devices for increasing the interest rate which has just been incorporated as one of the economic regulators of the economy. The hon. Member for Hands-worth (Sir E. Boyle) has expressed it very clearly. He has pointed out the traditional view that this is by far the best method of conquering inflation, that is to say, damping down the economic activity of the country at one particular point, that point being specially and chiefly the creation of capital assets by private industry.
I do not think that anyone on this side of the Committee would disagree that if one wants to do that as part of


decreasing and damping down the economic activity of this country, this is one of the instruments that one could use. It has advantages, and the not very drastic
use which the Government has made of it has undoubtedly had a strong effect. I do not think that anyone on this side of the Committee would doubt that. But as my right hon. Friend the Member for Battersea, North (Mr. Jay) pointed out, it is an instrument which is bound to rouse serious objections in present conditions.
Today, when Government borrowing and the National Debt and the like are such an enormous part of the economy, the sheer extra burden which the use of this regulator of the economy entails is, I do not say a prohibitive consideration, but a consideration which hon. Members opposite should not skate over and neglect as if it was not there at all. It is so wildly inconsistent with their general point of view about the appalling deleteriousness of Government expenditure. They calmly put on £65 million and do not turn a hair.
The interest to this side of the Committee is what is the net redistributory, or what I ventured to call counter-redistributory, effect of the transaction. We want to know where the money goes. I do not quarrel about the amount. We will call it £65 million for the sake of argument. Our interest is in to whom it goes and from whom it is taken. No doubt it is a very difficult transaction to follow out in detail. I take it that, generally, there can be no doubt that it goes to what one can only call the property-owning interests and classes in general. Those institutions may or may not increase their distributions as a result of it, but, broadly speaking, it must go directly or indirectly to persons of property.
Where does it come from? It comes out of the general Treasury purse, so it comes from taxes in general. It is true to say that, to some extent, it also comes from the very same class to whom it goes. It is part of a circular transaction, but, of course, indirect taxation is also a very large element in our Budget, and in so far as the money is drawn from that it is counter-redistributory because, it is taken from the general population and given to the property-owning section of the population. I do not know whether anyone

has calculated what would be the net effect on the distribution of the national income, but it must be counter-redistributory to some extent.

Sir E. Boyle: The right hon. Gentleman is talking about the counter-redistributive effect of higher interest rates. Surely he would agree that an immediate consequence is that the wealthier section of the community have a much smaller opportunity of making actual profit by the buying and selling of shares.

Mr. Strachey: Yes, but I should have thought that the stronger argument was that there is a depressing effect on entrepreneurs; it is more difficult for them to set up new businesses or to extend their present businesses. Indeed, that is the object of the exercise. It is intended to damp down the general amount of spending, in this case investment spending. That is what the hon. Member values so much as a means of conquering inflation. We on this side, of course, fully follow that argument, and it certainly has some effect—indeed, rather more than might be expected. But it must be pointed out that it has these serious disadvantages.
The budgetary one, the sheer transfer of money is, I think, the most speculatory, and the one we are bound to throw at hon. Members opposite, because it involves this large increase in public expenditure, which, for any other purpose, they would be the first to oppose. But that is not the most serious disadvantage. To my mind the most serious is that it damps down the national economic activity just at the point when it ought not to be damped down.
Although, no doubt, there is a case for preventing inflationary tendencies, it is a great pity that one should have to apply deflationary pressure at the very point of the creation of new capital, assets, because, as has been pointed out so often, there is nothing clearer than that if the country's economy is to progress, there must be a great deal of investment of all kinds, both public and private.
That, I should have thought, is the worst side of the use of this particular economic regulator of which the Government have made use. Dear money is quite an effective lever to use, but it has these grave disadvantages. It is a much more convenient and politically attractive


lever for a Government to use than the rather heroic economic regulator, which Sir Stafford Cripps used, of a very high budgetary surplus, which, of course, means a painfully high level of taxation and a lower level of Government expenditure. But I should have thought that in its effect on the economy it was a sounder way of conquering inflation, because it does not involve applying the pressure just at the crucial point of investment, where it ought not to be applied, and it does not have this counter-redistributory effect.
For these reasons, I think the Government were very short-sighted indeed in taking such credit to themselves for the use of this regulatory instrument. No one doubts that one must have instruments and levers for regulating the economy, and, indeed, that is our chief case. While I can quite see its political attractions, I am sure that in a time not very far ahead it will be found to be a costly and clumsy instrument to use for this purpose.

4.15 p.m.

Mr. Ian Horobin: I do not intend to intervene for very long on a subject which could, of course, involve a very lengthy debate, but it is of such great importance that I feel that one or two observations in answer to the speeches we have heard from the benches opposite would be appropriate. While I shall not spend any time arguing about the exact figures, I think that the figures offered by hon. Members opposite are much too high, and, of course, none of them has taken into account the fact that a substantial proportion of any figure like that comes straight back to the Exchequer by way of Income Tax, and that the net figure is much less.
I do not want to say more than a word or two on some observations which have been made and which, I hope, were not intended to confuse the issue by suggesting that this is a version of the bankers' ramp, and that they are getting the money. Nothing could be further from the truth, and only one reminder to the Committee is necessary on that. The direct result of this dear money was that for the first time in living memory only one of the joint stock banks was able to continue its certificate unchanged owing to the enormous losses incurred on their

capital investments. So, whoever made money out of this process, it was not the banks.

Mr. Jay: In fairness the hon. Gentleman ought to add that the profits of most of the banks, and the dividends of at least one of them, rose during the period.

Mr. Horobin: That may well be, but the net result was that they made enormous losses owing to dear money. Do not let us confuse the issue by suggesting that if they merely wanted to make large sums of money they would have liked dear money, because they were doing very well from the inflation which was going on in previous years owing to the shortsighted policy then adopted. I think we can put those two points aside.
I do not think it worth while spending much time in trying to prove the obvious, that, in fact, by and large the policy adopted by the Government in the last 18 months in regard to inflation has succeeded. It has not entirely conquered inflation, but it has brought about a drastic and surprising change in the situation. It is difficult to see what other policy of the Government, if not their monetary policy, has been responsible for the change.
The Government have made a start, though not much more than a start, in savings in Government expenditure, and they have not entirely succeeded in stopping the wages inflation. If the present position is not due to the change in the Government's monetary policy, then it is difficult to see how it has happened.

Mr. Beswick: Would the hon. Gentleman say that the recent fall in the price of raw materials in world markets follows from this monetary policy?

Mr. Horobin: Very largely, that is so, and not only in this country. Under the leadership of this country, very similar measures have been taken all over the world, and inflation is being brought to an end. Hon Members opposite may be glad to know that this country is still watched very closely by those who have charge of the finances of the world, because, as a consequence of the sad lapses of recent years, they have come to the conclusion that Her Majesty's present Government know what they are about.
Over the whole world in recent years there has been a very marked change in


monetary policy, not due solely to our example but partly, and strengthened and fortified by it. It is hardly a matter open to serious dispute that the falling away of the raging inflation with which the world was faced a couple of years ago has been due to what has been done here and to similar action elsewhere.
That is not the most useful point to which we can direct our minds, but it is not possible to deny it. Hon. Gentlemen opposite may attempt to deny it, but everybody all over the world knows that inflation has been either conquered or drastically reduced ever since my right hon. Friend the Chancellor of the Exchequer had the courage to take the decision he did on coming into office of putting into operation the old, traditional and long-tried method which has brought to an end every previous inflation.
That is not the point. It is that the Committee and the country are entitled to ask hon. Gentlemen opposite how they had intended to bring inflation to an end themselves, if not in this way. Ever since the war, and all through the time of the Socialist Governments in varying conditions year after year, there was a raging inflation which nobody was able to do anything about. That is a mere statement of fact.
It is true that in one year one section of the inflationary problem did take on a drastic change, contrary to what happened in all the other sections, but that was not due to anything that happened here. It was due to the enormous change in the wool situation in Australia and the effect of Korea on other parts of the sterling area. This country during those years was never in a healthy position.
It was only by enormous assistance from the United States that we came through, and at the cost of perennial crises, one after another, with ever-rising prices, resulting in the highest range of prices ever recorded in the history of this country. The raging inflation continued. It was destroying the value of savings and was beginning to destroy the incentive to saving. There was endless distortion of the economy by a whole array of controls, rationings and restrictions, which were bringing business and everything else to a state of chaos. That was the situation from which hon. Gentlemen

opposite fled 18 months ago. It was the situation which confronted us when we came into power, and that we have very nearly put right.
The Committee is entitled to know from hon. Gentlemen opposite, and the country will want to know at the next General Election how they would have brought inflation to an end if they would not do what we did, and whether they think that what we did was too expensive. They never did it. They left England in a state in which our foreign affairs, our monetary affairs and our internal price affairs were rapidly leading to a complete destruction of confidence here and abroad and our currency was becoming completely valueless. From this we were only saved by the change of monetary policy by the Government.

Mr. Roy Jenkins (Birmingham, Stetchford): In following the hon. Member for Oldham, East (Mr. Horobin), I must say that whatever else he is he is never dull, although he is sometimes rather bewildering. One does not know quite where he stood. Let me start by taking up one of his more surprising points, which was his claim that the changes in the internal trade of this country and in world prices which have taken place recently were largely due to the counter-inflationary policies of the present Government.
That was a rather sweeping statement and is rather difficult to reconcile with the fact that the peak of the inflationary movement in world prices came in June, 1951. That was actually the worst point in the movement of the terms of trade, but at any rate the inflationary peak was over several months before the present Government came into power and a still greater number of months before their policies could have had any effect. Therefore, I do not understand how they could have had that result.
The hon. Gentleman became very heated, as he always does, and the point at which he got most heated was when he asked what hon. Members on this side of the Committee would have proposed to do to cure inflation. There is a real difference between the hon. Member, with other hon. Gentlemen on that side, and the Opposition, as to what they mean by inflation. I would not for one moment deny that the year 1950 had


many of the characteristics of an inflationary situation. It is easy to describe 1950 as a year of raging inflation, but to do so is to equate inflation with full employment.
In 1950, wages went up very slowly and there was only a very small movement in the price level, in contrast to what has happened in the past 12 months. In our external balance, we were in a healthier position than we had been in any year since 1913. In what year since 1913 did we have a surplus on our foreign balance of £300 million, as we showed in 1950? It is not possible to argue very usefully what we should have done to cure inflation, because the hon. Gentleman has an entirely different definition of inflation from that which is accepted on this side of the Committee.
The hon. Member for Handsworth (Sir E. Boyle) made a very interesting contribution, but he could have made it still more interesting. He expressed his faith in the efficacy of the Chancellor's monetary policy, but he did not tell us exactly how that policy had worked itself out. We have heard many similar expressions of faith from even more distinguished people than the hon. Baronet. What are the precise benefits he claims have resulted from that policy and what is the machinery by which they have been achieved.

Sir E. Boyle: I confined my remarks deliberately to what I conceived to be the consequences of the rise in Treasury bill rates. On other occasions, in general economic debates, I have described how the increase in the Bank rate had helped OUT balance of payments and our economy generally, but this afternoon I did not want to be out of order.

Mr. Jenkins: I agree that the hon. Baronet has sometimes been more precise than many of his hon. Friends. I am sorry that he was not able to tell us a little more about it this afternoon. There is no doubt that the general effect of the dear money and credit restriction policy must be the damping down of investment. What sort of investment? Fixed investment or investment in stocks? In regard to fixed investment, I do not think that the rate of interest has, directly, much to do with it. In any event, the Chancellor says that the great problem he was facing in this Budget was to get

more fixed investment. So we seem to have come in a circle.
In regard to stocks, the effect of the increased rate of interest may be more definite. I would certainly agree that one of the problems of a year like 1951 was to control the volume of stocks and that one should not throw out of the window without close consideration any weapon which would enable us to do so.
What is claimed for the policy of dear money, in its effect upon stocks in the last year or so? At the time of his Budget the Chancellor was very touchy when we suggested that stocks had been reduced by £100 million. He said, "Not a bit," and that it was a most scandalous accusation to make. Exactly what does he claim has been the effect of this dear money policy?
4.30 p.m.
Even if he were assuming that there had been a run down of stocks, has the bill which
we have to meet today been necessary? I come back to the point which was made by my right hon. Friend the Member for Battersea, North (Mr. Jay)—the effect on the banks' credit policy. During the past year the banks have admittedly been rather more reluctant to make loans to private customers than they were previously, but that is not because private customers have been choked off by the higher interest rate.
The hon. Member for Handsworth quoted Lord Balfour of Burleigh. I rather think it was he who said, in his report, that the reason why advances to private customers had gone down was not because they were not still queueing up, but because the banks themselves were being more selective. It is the banks themselves which have decided to advance less money. It is well to ask why they could not have done that before. If the banks were loyally carrying out Government policy and obeying Government directives, why did they not themselves revise the interest rates? Why wait for a change of policy to do what was perfectly in their power to carry out at any time?
We must remember that during the past year the decline in the advances to private customers has been to a large extent offset by an increase in advances to the Government. If the hon. Member


for Oldham, East (Mr. Horobin) wants to make some more denunciations he can say that there has never been a Budget— certainly not in the time of a Labour Government—where estimates have gone so wildly astray and surpluses turned out so much smaller than was intended. The result has been a lot of very heavy borrowing from the banks, which has to a large extent neutralised the savings which have been effected through a reduction in advances to private customers. Part of the reason is the additional charge we are being called upon to meet this afternoon. Before we decide about this we need a more detailed explanation as to exactly how this policy has worked out and what are the exact benefits which are claimed, and not just general expressions of faith from the Financial Secretary or the Economic Secretary.

Mr. Ralph Assheton: I want to put one or two considerations before the right hon. Member for Dundee West (Mr. Strachey), to whose speech I listened with great interest, as I did to all the others. He mentioned three important matters. The first was that the increase in the Bank rate, had, he said, tilted the redistribution of wealth in favour of the owners of capital. He qualified that statement to some extent, but it is not unfair to say that that was his suggestion. He also suggested that it checked investment and, thirdly, that it added to the cost of the Budget.
As far as the redistribution of wealth in favour of the owners of capital is concerned, he will recognise the very heavy fall in value of investments which resulted from the rise in the Bank irate. We notice that 2½ per cent. Consols are now at about 60, as compared with 100 at the height of the Dalton period. The owners of capital have suffered a very large reduction in their capital. But the very act of increasing the Bank rate encouraged the formation of new capital. It encouraged that class of the community who are willing now to withhold some of their purchasing power and put it aside for the development of our trade and industry in future. That is a section of the community which should be encouraged and, therefore, though investment may have been checked in one sense, the means to make investments—our savings—have increased as a result of the higher rate of

interest, which is of the greatest possible benefit to the community.
His third point was that it adds to the cost of the Budget. I do not dispute that in any particular year when such a change is made the cost of the National Debt service rises, but will the Committee imagine what would have happened if this change had been made several years before, by the Socialist Government? An immense increase in the cost of Government expenditure would have been saved. The very high level of Government expenditure now is due to the very high cost of goods and services. Though there is an immediate increase in the cost of the service of the National Debt there is a long-term saving by the reduction of the general level of costs.
There is not the slightest doubt that if that position had been allowed to go on unchecked, as it was under the Labour Government, there would have been a continuing inflation and a continuing increase in the cost of expenditure and, consequently, the need to meet it by taxation. There are many things I could say about the Bank rate, but the three points to which I have referred were the ones I wanted to make.

Mr. Frederick Mulley: I venture to intrude in this debate because I do not think I have ever heard so many economic heresies from hon. Gentlemen opposite in so short a time. I am sorry that the right hon. Member for Blackburn, West (Mr. Assheton) ventured to say that there had been inflation under the Labour Government, after the very effectual reply which was made by my hon. Friend the Member for Stechford (Mr. Roy Jenkins) to the hon. Member for Oldham, East (Mr. Horobin).
How can it be said that there was a raging inflation in 1950 when our balance of payments position was stronger than it had ever been, and the increase in the cost of living index was very small? I would remind hon. Members opposite—despite their Election promises and posters—that the cost of living has risen by about 14 points since they had been in office. No doubt the Financial Secretary will tell us exactly by what amount it has gone up.
I was very surprised to discover, as the right hon. Member for Blackburn, West said, that when people realised that the capital value of their savings was being


consistently reduced it was a great incentive to save further. He said that the fact that Consols had dropped from 100 to 60 was a very great incentive for people to save, but they may be clever enough to realise that if this Government put up the rate of interest a little more they will lose even more of what they may have saved.

Mr. Assheton: The hon. Gentleman is, deliberately misrepresenting me, though he may be doing so with a smile on his face. The point is that the higher rate of interest prevailing under the new Bank rate encourages savers who are more willing to save with a higher rate of interest than with a lower rate, and are more willing to buy such Government securities as exist if for example, they are standing at 60 than if they are standing at 100.

Mr. Mulley: The right hon. Gentleman must be speaking of a period before the advent of Lord Keynes. The common sense view is that one saves only if one has a surplus from which to save. If one's expenses are very much in excess of one's income one does not save. It is only when the financial climate is such that money is available that people can afford to make savings. The rate of interest is a secondary consideration.
Facts can be documented to show that the actual volume of total savings is in inverse ratio to the height of the rate of interest. If we look back over the years we find that when the rate of interest was very high the volume of savings was very low. It is absolute nonsense to say that the addition of 1 per cent. to the rate of interest makes any difference to one's capacity to save. I think hon. Members opposite realise that. No business man who is thinking of making an investment pays very much regard to the rate of interest per se. He is much more concerned with the state of expectations than with the current price at which he can borrow money.
I shall not bore the Committee by going into this matter in great detail, but I recommend the right hon. Member for Blackburn, West and his hon. Friend the Member for Oldham, East to read the first number of the "Oxford Economic Papers," published in 1939. Statistics which were collected from business men showed how ineffective was the rate of interest in influencing entrepreneurial

decisions. With that advice I will leave that particular point.
The other point I would take up with the hon. Member for Oldham, East is the rate of interest and its effect on the balance of payments position. He would, no doubt, give credit to the rate of interest and the increase in the Bank rate for the fact that the terms of trade have turned, as we all very happily noted, so much in our favour in the last 18 months. Actually, the turning point was about two years ago. However, it is obvious nonsense to give any credit to the rate of interest for the fact that the terms of trade turned, as they did, up and down three or four times during the term of the Labour Government. It is quite absurd to suggest that to spend an extra £36 million—I think that is the figure—on short term rate of interest costs in order to cut stocks in this country by £100 million is anything but a very extravagant use of Government money. For that is really what it amounts to.
The balance of payments position was improved by cutting the stocks which the previous Government had carefully built up—despite the criticism of hon. and right hon. Gentlemen opposite that the Labour Government were not able to build up big enough stocks. I remember that the present Minister of Materials opened a debate on that subject in the House, and wrote many times to the newspapers saying that it was a scandal that we did not build up the strategic stockpile to a greater extent. Yet the present Government sought to improve the balance of payments position by running down the stocks we had built up.
However we may look at rate of interest, and the Bank rate in particular, it must be admitted that it is a very clumsy economic weapon. In the 19th century it was of great importance because of the gold standard. By a change in the Bank rate one could affect movements of foreign capital to flow inwards or outwards in a very short time. The world at that time was exceedingly sensitive to movements of money, and a small change in the Bank rate could have very great influence on our payments position. Clearly, that is not the case today. There is very little foreign money likely to move because of a change of several per cent. Certainly, a small movement of 1 per cent. or 2 per cent. would


not have an appreciable effect, when the consideration is not one of interest yield but one of political security and of security against devaluation and considerations of that sort.
I do not think that, in those circumstances, it can be argued by any sane person that we should subject, not only the national Exchequer but the exchequers of local authorities, who are greatly dependent on rates of interest in their housing and other investment policies, to this burden. In the 19th century this course might have had some validity, although whether it was ever right or wrong to subject the internal economy to the consequent stresses and strains and ups and downs is open to some doubt. Certainly, today there is no connection between a change in the Bank rate and the balance of payments position. I hope that we shall have a more plausible defence of the Clause from the Government than we have had so far from their back bench supporters.

4.45 p.m.

The Financial Secretary to the Treasury (Mr. John Boyd-Carpenter): The right hon. Gentleman the Member for Battersea, North (Mr. Jay) has, quite legitimately, made use of this Clause as a convenient peg on which to hang his now annual dissertation on monetary policy, and I shall have a word or two to say about that in a moment; but, strictly, what the Committee is being asked to discuss is Clause 32 of the Bill, and I think I must, in order to get the matter into proper proportion, point out that the very important topics to which the right hon. Gentleman devoted the greater part of his speech are by no manner of means the only factors affecting the provision which we are asking the Committee to make in this Clause.
For example, the total provision that is to be made in respect of the annual debt charge is affected by, among others, such considerations as the extent to which the floating debt is funded, the extent to which it is necessary from time to time to meet Exchequer deficits by borrowing, and, of course, as hon. Gentlemen opposite are aware, paradoxically enough, by the improvement in our overseas balance of payments position.
All these factors affect the figure which it is reasonable to ask the Committee to

agree to in this Clause, and there was, therefore, a somewhat unreal oversimplification of this question when the right hon. Gentleman sought to suggest, as he did, that the figure and the increased provision over last year, which I shall come to in a moment, in this Clause was connected apparently only with the change in monetary policy from that of the previous Administration.

Mr. Jay: I said "mainly."

Mr. Boyd-Carpenter: It is no part of my argument to dispute that the policy of dear money will involve some increase in the annual debt charge. It is not the purpose of my argument to argue contrary to that, but it is, I think, important for the Committee to appreciate that it is not possible with statistical precision to isolate that part of the provision which it is necessary to make in any particular year so as to show up that factor as compared with the numerous other factors, to several of which I made reference a moment ago, which are involved in this far from simple issue.
Let me take the figures involved. Last year, as the right hon. Gentleman correctly stated, the provision in the corresponding Clause of last year's Bill was £575 million. In fact, the out-turn for the year was £611,600,000. I would in that connection recall to the attention of the Committee the fact that it was indicated during last year's debate on the corresponding provision that although the figure in last year's Bill had taken account of the change in money rates of the previous November it did not purport to take into account any change which might flow from the change announced in the Budget.
The provision in this Clause, as the Committee will observe, is very close to the actual out-turn of last year, and as things stand today it is submitted as a reasonable calculation as to what will be required on the assumption that both the volume of debt and the rates of interest remain pretty well as at present.
The debt charge for 1953 to 1954 was, in fact, calculated on the basis of the debt as it stood at the beginning of the financial year and on the general hypothesis that, as the Chancellor of the Exchequer said in his Budget speech:
It appears to me that conditions in 1953 as we now see them will require broadly a


continuation of the monetary measures in operation now."—[OFFICIAL REPORT, 14th April, 1953; Vol. 514, c. 52.]
Those words clearly neither foreshadow nor preclude changes in the size and composition of the debt or in the structure of interest rates that may occur during the year. The figure of £615 million represents about the same charge on the Budget as was actually incurred last year, and is, therefore, the best forecast which could be made of the cost during the present year with a flexible monetary policy.
That brings me to the somewhat broader issues affecting this figure and by which this figure is affected, to which reference has been made during the debate. I do not propose to take up very much of the time of the Committee in seeking to argue with the right hon. Gentleman the Member for Dundee, West (Mr. Strachey) on the precise and ultimate distribution of these moneys. I do not propose to attempt to prejudice a serious argument upon what is one of the most serious matters in the whole of our national affairs by prejudicial efforts of that kind. Nor do I propose to follow the right hon. Gentleman the Member for Battersea, North in his pleasantry of describing an increase in the Education Estimates of £20 million as a cut. A very curious kind of cut.

Mr. Jay: I did not say "cut." I said the Government had been economising on education. I do not think that the hon. Gentleman would deny that that is true.

Mr. Boyd-Carpenter: It is an interesting and perhaps, as regards the late Government, revealing indication of the right hon. Gentleman's idea of economy that he so regards an increase of £20 million in a budgetary contribution. So far as concerns the banks, to which the right hon. Member for Dundee, West referred, the matter is far from straightforward. Clearly, they gain by obtaining increased interest payments, but there is, as one of my hon. Friends pointed out, the loss of a consequential fall in the value of the securities they hold. The matter is nothing like as straightforward or clear, one way or the other, as the right hon. Gentleman thinks.
The point I want to make is that those aspects of the matter, be they accurately stated or be they not, are really no more to do with the merits of the policy we are discussing from the national point of view than if I were to comment that the financial policy of right hon. Gentlemen opposite had brought large capital gains to a number of stockbrokers. Neither consequence was the main effect of the policy. I hope that the Committee will allow us to discuss the matter on its merits from the national point of view.

Mr. Strachey: I wish to correct a statement which was made earlier by a right hon. Gentleman opposite, that I said that the £65 million, or whatever the figure is, goes to the banks and the bankers. I believe I was careful to say that, in so far as one could trace it at all, it went to the property-holding classes in the broadest sense. It would be wrong to say that it went only into the banks. It is much broader.

Mr. Boyd-Carpenter: The right hon. Gentleman is saying exactly what I attributed to him. He is seeking to introduce that sort of element into this discussion, and that is, I suggest, no more pertinent to this than the benevolence of his right hon. Friends to stockbrokers during the previous Administration. The issue between us is whether it is right to do as the late Government did—from the highest of principles, I am sure—and adhere to a cheap money policy regardless of circumstances, or whether to use the monetary instrument together with and in co-operation with others in order to achieve one's financial and economic ends.
I know that cheap money has a kind of theological significance for a certain number of right hon. and hon. Gentlemen opposite. It is more a matter of faith, faith in the Shavian sense of believing in what one knows is not true rather than relying on reason. By that very fact hon. Gentlemen opposite deprived their last Government, as they indicate they would like to deprive a future Socialist Government, of the capacity to use this instrument by insisting that, whether the economy be deflated or inflated, there must be cheap money in all circumstances.
The hon. Gentleman should study the policy document of his own party which


has just been issued. There, after a very clear statement to which no one could take exception, to the effect that both budgetary surplus and monetary policy are instruments for affecting the economy in the direction in which one wishes it to go, the document rejects the monetary instrument and then uses the remarkable words that Labour's Budgets were planned to keep down spending so that enough investment could take place without inflation and that steps were taken to ensure that the right amount of investment was not held up either by lack of credit from the banks or by interest rates being too high.
I am sure that Labour's Budgets were planned to keep down spending and inflation. The only thing is that they did not check inflation. The reason why I am suggesting that, with the best will in the world, they failed to check inflation was because they fought inflation with one hand behind their back, with one instrument, the monetary instrument, voluntarily not used. That is the reason why all the devotion, skill and thought that went into successive financial proposals by successive Labour Chancellors of the Exchequer failed to check the general inflationary tendency. They were righting inflation with one hand behind their back, and inflation won.
It is clear that we have here a difference between us which as I said—I said it in no offensive sense—amounts almost to a difference in doctrine or faith. There is a refusal by right hon. Gentlemen opposite to use the monetary instrument, in whatever circumstances it may be. We, on the other hand, concede that this is a flexible instrument and that there are deflationary circumstances in which cheap money is of great advantage and inflationary circumstances when dearer money is of great advantage. But hon. Members opposite stick to cheap money in all circumstances. They resemble the gentleman who went for a walk without a mackintosh and got caught in the rain, and then walked about in a mackintosh through a long heat wave so that he should not be caught again, to the detriment of his health and comfort.
I am content to leave the question to be judged by the results. It is a fact that my right hon. Friend's policy, of which this is an important part, has broadly achieved the purpose for which

it was conceived by, first of all, rescuing our economy from the grave balance of payments crisis which we found, and, as part and parcel of that process, by checking the steady inflationary process which, broadly, had continued since the war. It is on those facts that I suggest that this policy should be judged.
I do not wish to weary the Committee with figures with which most hon. Members are probably familiar, but it is a fact that, whereas the cost of living indices during the term of office of the late Administration rose in all by 40 per cent., in the 14 months which have elapsed since the Bank rate was raised to 4 per cent., the increase has been only 4 per cent., and hon. Members on both sides of the Committee will be glad to observe that the latest figure shows a decrease of one point.
Surely it must occur to hon. Gentlemen opposite that this is not merely coincidence. The fact that our overseas balance has been so immensely improved and the inflationary process so conspicuously checked, despite their most devoted efforts without this instrument to do the same, must convince them that this instrument is in contemporary circumstances part and parcel of the sensible management of the economy. Once one concedes that argument, most hon. Members must agree with the budgetary element here as money very well spent. It is money spent on getting the whole economy of this nation into better trim and on dealing with the most practical and urgent problems that face the nation. That surely is the justification.
But if one looks at it even from the narrow budgetary point of view, which it is quite proper to do during the Committee stage of the Finance Bill, one has at once to admit that the narrow budgetary consequences are not to be limited or confined to the effects of the Clause. Had this provision and this policy not succeeded in checking the inflationary pressures in this country, it is clear that other parts of my right hon. Friend's financial provisions would, as a result of rising prices, have had to be much ampler than is, in fact, necessary. The provision in this Clause clearly saves expenditure in others.
It is equally a fact—I agree with the right hon. Member for Dundee, West—


that the alternative to the use of monetary policy in this way is a much bigger Budget surplus. We can argue—and it is an interesting intellectual argument—whether a larger Budget surplus and no use of the monetary instrument is better than a smaller Budget surplus and the use of the monetary instrument. But it only obscures that argument to say that the method which we prefer, and which is embodied in this Bill, is, from the budgetary point of view, much more expensive, because if by putting this provision in this Clause we diminish the necessity for so large a budget surplus, we have to that extent relieved the economy of the taxation to be imposed in order to secure the surplus.
On that score, therefore, the budgetary point of view as I put it in support of the argument for this provision is very strong.

5.0 p.m.

Mr. Jay: But would the hon. Gentleman not agree, if he uses that argument, that the deflationary effect of the higher bank rate would reduce the revenue from both indirect and direct taxation and the matter would, therefore, have to be raised?

Mr. Boyd-Carpenter: I would agree with the right hon. Gentleman that the inflationary situation over which he hopes to preside has most happy consequences from the public revenue point of view. Our policy has a significance in restoring a more normal balance in our economy by taking out of the revenue that inflationary creating element. Here we are dealing, as I have said, with the national budgetary point, and I would suggest that the need for higher expenditure owing to higher prices in other parts of our national expenditure would have been inevitable if that expenditure had not been undertaken. At least I carry with me the right hon. Gentleman the Member for Dundee, West in saying that if we had not done it then a much larger budget surplus would have been necessary.
I come back to the consideration which I put before the Committee, that though we have properly and rightly discussed this matter in Committee stage on this Bill in the closest connection with the actual financial provision which it is necessary to make in Clause 32, it is necessary to recall that the expenditure

which we are here asking the Committee to agree to is expenditure which is an essential part of my right hon. Friend's measures whose effect upon the economy of our country and the vast improvement that they have brought about is now part of history.

Mr. Hugh Gaitskell: I should like to express my thanks to the Chancellor of the Exchequer, as well as my regret that he is not able to be here, for having agreed to our having this debate at a reasonable hour this afternoon instead of at a late hour last week. Both sides of the Committee will agree that we have had an extremely interesting and useful debate, and they would also agree with me that the subject is one worthy of the attention of the House of Commons. It is perhaps unfortunate that we do not get more opportunities for discussing these extremely important matters, which, though technical, nevertheless, directly or indirectly have an effect on the life of everybody in the country.
I am sorry that I cannot couple with my expression of thanks to the Chancellor any expression of agreement or even of gratitude to the Government spokesman on this occasion. I feel that the Financial Secretary did himself less than justice, because he seemed to me to be speaking from a prepared brief and making no attempt to answer the arguments put forward by this side. Indeed, he seemed to have a completely false idea of what the Opposition's view was on this matter. In the course of the few remarks I make I will endeavour to enlighten him on that, though I do not suppose there will be an opportunity of getting him to reply at any further stage of these proceedings.
The Clause which we are considering involves a charge on the whole of the National Debt. In this debate we have confined ourselves almost entirely to the question of the interest on that National Debt, and in particular to the interest on the floating Debt and the increase which this interest on the floating Debt amounts to in the last two years. There was some discussion earlier about the exact amount that was involved, and I think the hon. Member for Handsworth (Sir E. Boyle) said my right hon. Friend the Member for Battersea, North (Mr. Jay) had been widely out in his estimate. My right hon. Friend, when putting forward


his estimate, in which he had no assistance from the Government, was expressing what he believed to be the increased cost to the Exchequer of the new policy. It was not merely the narrow issue of 1952–53 expenditure that my right hon. Friend was concerned with, but the actual increase from the point at which the new policy began.
I have no reason to believe that what he said this afternoon, that that increase amounts to £65 million, is wrong. I do not think the Treasury have ever denied it. I agree with the Financial Secretary that the gross figures are confusing and involve many other changes. But my right hon. Friend made the same point himself in his estimate, and we make from the figures available an increase of some £65 million. That is not very far from the figure of £80 million which my right hon. Friend gave last year. At any rate, we can agree that this is a substantial amount.
The first point I want to make is, there seems to be a substantial difference of attitude on the part of hon. Members opposite on the question of the amount of interest on the National Debt. The £65 million is treated as nothing much to worry about, but when it comes to £15 million or even £5 million of other items of Government expenditure, particularly the social services, then there is a tremendous row. The right hon. Gentleman the Member for Blackburn, West (Mr. Assheton) is continually upbraiding us, and the Government Front Bench, for not doing enough to reduce Government expenditure. I was very surprised to hear he said no word of reproach about this particular increase.

Mr. Assheton: I have been saying that, in my opinion, it does, on balance, save the Government money rather than cost the Government money.

Mr. Gaitskell: I think it would be difficult to sustain that contention, and I have heard no argument to that effect except one of a very vague kind. And once one gets into that field—of the particular items of expenditure which indirectly save the Government money—it could be expanded fruitfully over a large part of Government expenditure.
The justification put forward by the Government for this substantial increase

—an increase which in our opinion should be most carefully examined—is that the rise in the debt charge was necessary for economic reasons; and, secondly, that it was not only necessary over the past year but is necessary for the next year. In other words, the policy must be continued, and the Financial Secretary this afternoon confirmed that that was the attitude of the Chancellor.
We do not agree that the rise in the debt charge of £65 million was a necessary element of a policy of credit control. That is the first point, and the second is that we at least have the gravest doubts as to whether, even assuming that the Government policy had been right at the time, it should now be continued in existing circumstances. It is to these two propositions that I want now to address myself.
I will try to explain to the Financial Secretary what our attitude is. He kept on speaking about cheap money and dear money, and though I admit that many people use these phrases they are apt to be misleading. Is cheap money, for instance, to cover not merely the 2 per cent. Bank rate, but the policy of trying to reduce the long-term rate to 2½ per cent.?
That would be possible from one point of view, but if that was his interpretation it could hardly be said to be the policy of Sir Stafford Cripps, because under Sir Stafford Cripps' Chancellorship the long-term rate of interest rose quite substantially. I would suggest to him that we are concerned not with the long-term rate of interest but with the short-term rate of interest, and it is better to confine ourselves primarily to that.
I only mention, in passing, that the argument that the banks have a business loss on the value of their investments because of the dear money policy is correct only if we are speaking of the long-term rate of interest. It is equally correct to say that the fall in the value of those stocks and investments largely took place before the Government came into power and introduced the new monetary policy. The major effect has undoubtedly been on short-term rates.
My second point is that so far as the short-term rate is concerned—I have already explained that the long-term rate had already risen—it was our view, and


still is, that we ought not to have to burden the Exchequer in this manner in order to exercise effective credit control. The argument on the other side is a familiar one; that if the Government are borrowing, if they want to exercise credit control, then they must obviously exercise that control over the banks. It is, therefore, impossible to peg the Treasury bill rate, because if you do, the banks can always re-borrow from the Bank of England at ½ per cent. or whatever figure is chosen.
I was interested in the point made by the hon. Member for Handsworth (Sir E. Boyle) that one had to take out that peg in order to have effective control over credit. That is true, on the assumption that there is no co-operation from the banks at all. If the hon. Member is saying to us, "You were very silly to expect any such co-operation. What you should have done was to exercise your powers of control by removing the peg long ago," that is a point of view, though it is not one to which I subscribe.

Sir E. Boyle: I suggest that physical controls or exhortations are much more likely to be effective if monetary policy is, at the same time, going in the same direction.

Mr. Gaitskell: It is not a question of monetary policy going in the same direction. The monetary policy, so far as its effects on the country are concerned, starts from the point of the banks' lending or the banks' purchasing or selling securities or bills. If, in fact, the banks are prepared to collaborate, they should be able to carry out whatever policy the Government ask them to carry out. I do not believe that it is impossible to secure that collaboration over, for instance, the extent of advances and that, therefore, it is necessary to exercise this ultimate sanction, which I agree has been in the past the traditional sanction.
I believe that the control of credit can and should be exercised in a more direct manner by the Treasury over the banking system. If the hon. Gentleman says to me, "Well, you cannot do that, it is no good. Whatever the banks may say, they do not carry out this policy and you have to exercise the other system, the traditional system of control, whether by bank rate or open market policy," I would say that, even so, I am not satisfied that we

need to resuscitate the policy of the Bank rate itself.
If the Government are giving any serious consideration to this matter, I ask them to consider the example of some other countries where the control over the banking system is exercised far more through the direct fixing of liquidity ratios—the ratio in which the banks may hold different forms of assets—-than through movements of short-term interest rates. Sweden is a particularly interesting example and, of course, though there is a relative difference, America herself has far more direct control.

Mr. Horobin: This argument is becoming a trifle technical but, as I understand, the right hon. Gentleman is endeavouring to found his argument upon the possibility, not over a short period but in perpetuity, of completely divorcing long-term from short-term rates. He quoted America. The American Federal Reserve Board have been trying, at the expense of a prolonged war with the Federal Reserve structure, to carry that out and it has broken down completely. Is the right hon. Gentleman suggesting to the Committee the view that we can in perpetuity keep long-term rates and short-term rates entirely divorced from one another?

Mr. Gaitskell: No, I am speaking about the rate on Treasury bills. It is my view that with the size of the present Government debt some policy must be found under which Treasury bills are taken out of the rest of the market for bills, and the rate of interest on those pegged, as in the war and for a long time afterwards, so that changes in the credit structure can take place without burdening the Exchequer. I believe that in course of time we shall come to such an arrangement, and my criticism of the Government is that, far from making any attempt to find it, they are simply reverting to the traditional policy. I am not saying it is there waiting for us because there would have to be investigations and discussions. However, I do not want to spend much time on this because, as the hon. Gentleman said, it is a highly technical matter.
5.15 p.m.
My third point is the economic effect of the change in the Bank rate and I couple with that the change in the credit


structure of the banking system. Looking at it objectively I think there is considerable doubt as to precisely how much effect those policies have had on the economy. I can see that there may have been some influence through these policies on the level of stocks which firms hold. That has come about, incidentally, simply because of the banks restricting— in effect, rationing—credit to firms plus a certain psychological effect which the rise in interest rates may have had.
At any rate, I think it is possible that that may be so, and I would not deny it. I would say, however, that even if there had been no change in monetary policy, it is extremely likely that firms would have ceased building up stocks for the simple reason that world commodity prices were already falling. After all, there is a point at which people do not want to hold any more stocks in any case.
My hon. Friend the Member for Stetch-ford (Mr. Roy Jenkins) dealt effectively with the argument of the hon. Member for Oldham, East (Mr. Horobin) that this policy had itself had an influence on the commodity markets. As my hon. Friend said, the fact is that the break in prices came six months before this policy was introduced——

Mr. Horobin: It had already been introduced in the U.S.A.

Mr. Gaitskell: Nobody would deny that what happens in the economy of a big and powerful buyer affects the rest of the world. Of course, any change in policy in the United States is likely to affect world markets, but it is our contention that changes in policy here affect them very much less.

Mr. Horobin: The change in policy in America was a change towards dearer money.

Mr. Gaitskell: We are not contesting that. In so far as it is true that a dearer money policy there had an influence in the ways I have indicated, it might have an influence there. That might be true but, so far as this country is concerned, it is extremely difficult to say that it was anything like the sole factor which induced the change in stocking up and led to the fall in prices.
The truth is that hon. Gentlemen opposite will persist in talking in this rather ridiculous way about a raging inflation here. I would ask them, the hon. Member for Oldham, East and the Financial Secretary, some time to think out exactly what they mean by inflation. Do they mean a deficit in the balance of payments? If one takes 1951 then there was an inflationary condition, but it is equally clear that there could not possibly have been an inflation in 1950 if that is the case because we had an immense surplus in that year.
Nobody can possibly contend that any change in the internal monetary situation occurred between 1950 and 1951 which could explain the difference between the balance of payments between the two years. I do not want to go into all that again. We have argued it out here during the debate on the Budget and I have explained fully how I believe that change took place, and also how the change in 1952 took place. I do not think that monetary policy had much to do with it one way or the other.
As to the movement of prices, the fact is that in this country we are tremendously affected by world prices. The most important fact since the Government came into power is that while prices elsewhere have been falling—and I mean the cost of living—or rising slightly, they continued to rise here and to rise faster than in other countries. That is the really important difference.
I turn, finally, to the present situation. I leave the arguments about doctrine, interesting and important as they are, and come to the question of what ought to be done now. It is not denied that we have had a flagging of production lately. The Chancellor himself has used the words, "under-production." We all know we are only now producing about as much as we were two years ago. It is admitted on all sides—there may be dispute about the causes—that the situation is rather deflationary than inflationary, or at any rate that there has been a marked change. I should say that there has been a change in the whole world situation.
It is admitted, further, that because of the stretching out of the defence programme we ought now to make a great effort to increase the level of investment in this country. I ask the Government and hon. Members opposite whether they


really believe they are likely to get a big expansion in investment—if they agree with us that that is necessary—on the basis of the present Bank rate policy? I find it extremely hard to believe that that would be so.
I admit, here, that the distinction between short-term and long-term rates has to be borne in mind. It would obviously be foolish to expect an increase in investment as a result of reducing short-term rates if long-term rates were unaffected. If it is the case that the major influence of the Bank rate has been a psychological influence because, however irrational, people regard a rise as a signal for deflation and a fall as a signal of expansion if they want expansion, I would have thought that they should think seriously about putting the policy into reverse.
It may be said that that would mean building up stocks and that the balance of payments will not stand that. There might be some such effect, but I think it most unlikely that changes in the short-term rate, coupled with tighter or looser credit by the tanks themselves are decisive in this matter. I would have thought that at the moment there was no very serious danger that the consequences would be an increase in stocks, but if there were, is not that a risk that ought to be taken? Are we not so anxious to build up our competitive position and to improve our equipment in our industry that we should give every possible incentive to do so? If, in fact, the Government are sincere about efforts to raise investment I am bound to say that I find it hard to see how they can continue with their monetary policy as it is.

Mr. A. C. M. Spearman: Can the right hon. Member think of any instance where a manufacturer has been deterred by high interest rates from investing and improving his equipment, knowing that it will produce immediate results? Is not a high rate of interest policy going to deter only long-term plans which, although they are excellent, we cannot afford?

Mr. Gaitskell: If the hon. Member is right that is something of a criticism of Government policy earlier. Presumably it works both ways, or does not, and the hon. Member is saying, in effect, that it does not. If so, where is the case for

the policy of 1951? I would not agree entirely with that. I have admitted that it is extremely difficult to be sure in this matter. I think that is the only honest point of view I can adopt and I believe that the psychological effect of the higher Bank rate did have a seriously discouraging effect on investment. It led to boards of directors all over the country saying, "We had better be careful. We were thinking of building that extension, or buying those machines which we thought were so good "——

Mr. Frederick Lee: Or new ships.

Mr. Gaitskell: Or, as my hon. Friend says, they may be thinking of having new ships.

Mr. Spearman: Manufacturers base their long-term policy on this and that is what we want so much to encourage now. Steady interest rates influence manufacturers on their long-term projects but not on those urgent ones that we want so much to encourage now, that is why I think the dear money policy has freed money for vital investment purposes.

Mr. Gaitskell: I wish I had more time to discuss this matter. Very long-term investments are now mostly in the hands of the Government, whether they be for housing or generating stations and, in so far as they are not, ships have been mentioned, where I should think there would be a great deal to be said for encouraging production. Indeed, I was not aware that hon. Members opposite had taken any other line in recent debates.
I would sum up our position like this: We do not believe that the old fashioned traditional policy of the Bank rate is, in present circumstances, a very effective weapon of control. We do, of course, believe that credit control is an instrument of economic planning. The Financial Secretary to the Treasury was good enough to quote from the recent policy statement. It is perfectly plain that that statement sets out very clearly that of course monetary policy is one of the instruments of control. But we believe that instrument can be used in a way which does not involve this heavy burden on the Exchequer. That is our first charge against the Government.
Our second charge against the Government is that in existing circumstances we


believe their use of the Bank rate is having damaging consequences. We believe that it is inconsistent with what they say and profess in other fields and on other occasions. In view of the fact that this is the only opportunity of giving and recording our views on this important

policy, for the reasons I have given, I suggest to my hon. Friends that we should now divide against the Clause.

Question put, "That the Clause stand part of the Bill."

The Committee divided: Ayes, 219; Noes, 189.

Division No. 195.]
AYES
[5.30 p.m.


Aitken, W. T.
Gridley, Sir Arnold
Noble, Cmdr. A. H. P.


Allan, R. A. (Paddington, S.)
Grimond, J.
Nutting, Anthony


Alport, C. J. M.
Grimston, Hon. John (St. Albans)
Oakshott, H. D.


Arbuthnot, John
Grimston, Sir Robert (Westbury)
Odey, G. W.


Ashton, H. (Chelmsford)
Hall, John (Wycombe)
O'Neill, Phelim (Co. Antrim, N.)


Assheton, Rt. Hon. R. (Blackburn, W.)
Harris, Frederic (Croydon, N.)
Ormsby-Gore, Hon. W. D.


Astor, Hon. J. J.
Harrison, Col. J. H. (Eye)
Orr-Ewing, Charles Ian (Hendon, N.)


Baker, P. A. O.
Harvey, Air Cdre. A. V. (Macclesfield)
Osborne, C.


Baldock, Lt.-Cmdr. J. M.
Harvey, Ian (Harrow, E.)
Partridge, E.


Baldwin, A. E.
Harvie-Watt, Sir George
Peake, Rt. Hon. O.


Barber, Anthony
Hay, John
Perkins, W. R. D.


Baxter, A. B.
Head, Rt. Hon. A. H.
Peto, Brig. C. H. M.


Bell, Philip (Bolton, E.)
Heath, Edward
Peyton, J. W. W.


Beach, Maj. Hicks
Higgs, J. M. C.
Pilkington, Capt. R. A.


Bennett, F. M. (Reading, N.)
Hinchingbrooke, Viscount
Pitman, I. J.


Bevins, J. R. (Toxteth)
Hirst, Geoffrey
Powell, J. Enoch


Bishop, F. P.
Holland-Martin, C. J.
Price, Henry (Lewisham, W.)


Black, C. W.
Holmes, Sir Stanley (Harwich)
Prior-Palmer, Brig. O. L.


Bossom, Sir A. C.
Hopkinson, Rt. Hon. Henry
Raikes, Sir Victor


Bowen E. R.
Horobin, I. M.
Redmayne, M.


Boyd-Carpenter J. A.
Howard, Gerald (Cambridgeshire)
Rees-Davies, W. R.


Bayle, Sir Edward
Howard, Han. Greville (St. Ives)
Remnant, Hon. P.


Braine, B. R.
Hulbert, Wing Cdr. N. J.
Renton, D. L. M.


Braithwaite, Sir Albert (Harrow, W.)
Hurd, A. R.
Roberts, Peter (Heeley)


Braithwaite, Lt.-Cdr. G. (Bristol, N..W.)
Hutchinson, Sir Geoffrey (Ilford, N.)
Robertson, Sir David


Bromley-Davenport, Lt.-Col. W. H.
Hylton-Foster, H. B. H.
Robinson, Roland (Blackpool, S.)


Brooke, Henry (Hampstead)
Jekins, Robert (Dulwich)
Robson-Brown, W.


Buchan-Hepburn, Rt. Hon. P. G. T.
Johnson Eric (Blackley)
Rodgers, John (Sevenoaks)


Bullard D. G.
Joynson-Hicks, Hon. L. W.
Roper, Sir Harold


Bullus, Wing Commander E. E.
Kaberry, D.
Ropner, Col. Sir Leonard


Burden, F. F. A.
Keeling, Sir Edward
Russell, R. S.


Butcher, Sir Herbert
Kerr, H. W.
Ryder, Capt. R. E. D.


Butler, Rt. Hon. R. A. (Saffron Walden)
Lambert, Hon. G.
Salter, Rt. Hon. Sir Arthur


Campbell, Sir David
Lancaster, Col. C. G.
Sandys, Rt. Hon. D.


Cary, Sir Robert
Law, Rt. Hon. R. K.
Savory, Prof. Sir Douglas


Channon, H.
Leather, E. H. C.
Scott, R. Donald


Clearke, Col. Ralph (East Grinstead)
Legge-Bourke, Maj. E. A. H.
Scott-Miller, Cmdr. R.


Clarke, Brig. Terence (Portsmouth, W.)
Legh, Hon. Peter (Petersfield)
Simon, J. E. S. (Middlesbrough, W.)


Cole, Norman
Linstead, Sir H. N.
Smithers, Sir Waldron (Orpington)


Conant, Maj. R. J. E.
Lloyd, Rt. Hon. G. (King,'s Norton)
Soames, Capt. C.


Cooper-Key, E. M.
Lloyd, Rt. Hon. Selwyn (Wirral)
Spens, Rt. Hon. Sir P. (Kensington, S.)


Craddock, Beresford (Spelthorne)
Lockwood, Lt.-Col. J. C.
Stanley, Capt. Hon. Richard


Crookshank, Capt. Rt. Hon. H. F. C.
Low, A. R. W.
Stevens, G. P.



Lucas, Sir Jocelyn (Portsmouth, S.)
Steward, W. A. (Woolwich, W.)


Crosthwaite-Eyre, Col. O. E.
Lucas, P. B. (Brentford)
Stoddart-Scott, Col. M.


Grouch, R. F.
Lucas-Tooth, Sir Hugh
Storey, S.


Crowder, Petre (Ruislip—Northwood)
McAdden, S. J.
Strauss, Henry (Norwich, S.)


Davidson, Viscountess
McCorquodale, Rt. Hon. M. S.
Studholme H. G.


Davies, Rt. Hn. Clement (Montgomery)
Macdonald, Sir Peter
Summers, G. S.


Deedes, W. F.
McKibbin, A. J.
Sutcliffe, Sir Harold


Digby, S. Wingfield
Mackie, J. H. (Galloway)
Taylor, Charles (Eastbourne)


Dodds-Parker, A. D.
Maclean, Fitzroy
Taylor, Wiliam (Bradford, N.)


Donner, Sir P. W.
Macleod, Rt. Hon. lain (Enfield, W.)
Thomas, Rt. Hon. J. P. L. (Hereford)


Doughty, C. J. A.
Macpherson, Niall (Dumfries)
Thomas, Leslie (Canterbury)


Drayson, G. B.
Maitland, Comdr. J. F. W. (Horncastle)
Thomas, P. J. M. (Conway)


Fell, A.
Manningham-Buller, Sir R. E.
Thorneycroft, Rt. Hn. Peter (Monmouth)


Finlay, Graeme
Markham, Major Sir S. F.
Tilney John


Fisher, Nigel
Marples, A. E.
Touche, Sir Gordon


Fleetwood-Hesketh, R. F.
Maude, Angus
Turner, H. F. L.


Fletcher-Cooke, C.
Maudling, R.
Turton, R. H.


Ford, Mrs. Patricia
Maydon, Lt.-Comdr. S. L. C.
Tweedsmuir, Lady


Fort, R.
Medlicott, Brig. F.
Vaughan-Morgan, J. K.


Foster, John
Mellor, Sir John
Wakefield, Edward (Derbyshire, W.)


Fraser, Hon. Hugh (Stone)
Molson, A. H. E.
Wakefield, Sir Wavell (St. Marylebone)


Fyfe, Rt. Hon. Sir David Maxwell
Moore, Lt.-Col. Sir Thomas
Walker-Smith, D. C.


Garner-Evans, E. H.
Mott-Radclyffe, C. E.
Ward, Hon. George (Worcester)


George, Rt. Hon. Maj. G. Lloyd
Nabarro, G. D. N.
Ward, Miss I. (Tynemouth)


Godber, J. B.
Nicholls, Harmar
Waterhouse, Capt. Rt. Hon. C.


Gough, C. F. H.
Nicholson, Godfrey (Farnham)
Webbe, Sir H. (London &amp; Westminster)


Gower, H. R.
Nicolson, Nigel (Bournemouth, E.)
Wellwood, W.


Graham, Sir Fergus
Nield, Basil (Chester)
Williams, Rt. Hon. Charles (Torquay)




Williams, Sir Herbert (Croydon, E.)
Wilson, Geoffrey (Truro)
TELLERS FOR THE AYES:


Williams, Paul (Sunderland, S.)
Wood, Hon. R.
Mr. Drewe and


Williams, R. Dudley (Exeter)
York, C.
Mr. Richard Thompson.


Wills, G.






NOES


Acland, Sir Richard
Hannan, W.
Reid, Thomas (Swindon)


Albu, A. H.
Hargreaves, A.
Reid, William (Camlachie)


Allen, Scholefield (Crewe)
Harrison, J. (Nottingham, E.)
Rhodes, H.


Anderson, Frank (Whitehaven)
Hayman, F. H.
Roberts, Albert (Normanton)


Attlee, Rt. Hon. C. R.
Henderson, Rt. Hon. A. (Rowley Regis)
Roberts, Goronwy (Caernarvon)


Awberry S. S.
Hewitson, Capt. M.
Robinson, Kenneth (St. Pancras, N.)


Bacon, Miss Alice
Hobson, C. R.
Rogers, George (Kensington, N.)


Bartley, P.
Holman, P.
Royle, C.


Bellenger, Rt. Hon. F. J
Holmes, Horace (Hemsworth)
Shackleton, E. A. A.


Benn, Hon. Wedgwood
Houghton, Douglas
Shinwell, Rt. Hon. E.


Beswick F.
Hudson, James (Ealing, N.)
Short, E. W.


Bevan, Rt. Hon A. (Ebbw Vale)
Hughes, Cledwyn (Anglesey)
Silverman, Sydney (Nelson)


Bins G. H. C.
Hynd, H. (Accrington)
Simmons, C. J. (Brierley Hill)


Blackburn F.
Irvine, A. J. (Edge Hill)
Skeffington, A. M.


Blenkinsop, A.
Irving, W. J. (Wood Green)
Slater, J. (Durham, Sedgefield)


Blyton, W. R.
Isaacs, Rt. Hon. G. A.
Smith, Ellis (Stoke, S.)


Bowles, F. G.
Janner, B.
Smith, Norman (Nottingham, S.)


Brockway, A. F.
Jay, Rt. Hon. D. P. T.
Snow, J. W.


Brook, Dryden (Halifax)
Jeger, George (Goole)
Sorensen, R. W.


Broughton, Dr. A. D. D.
Jeger, Dr. Santo (St. Pancras, S.)
Soskice, Rt. Hon. Sir Frank


Brown Thomas (Ince)
Jenkins, R. H. (Stechford)
Sparks, J. A.


Burke, W. A.
Johnson, James (Rugby)
Stewart, Michael (Fulham, E.)


Burton Miss F. E.
Jones, David (Hartlepool)
Strachey, Rt. Hon. J.


Callaghan, L. J.
Key, Rt. Hon. C. W.
Stross, Dr. Barnett


Castle, Mrs. B. A.
King, Dr. H. M.
Summerskill, Rt. Hon. E.


Champion, A. J.
Lee, Frederick (Newton)
Sylvester, G. O.


Collick, P. H.
Lewis, Arthur
Taylor, Bernard (Mansfield)


Corbet, Mrs. Freda
Lipton, Lt.-Col. M.
Taylor, Rt. Hon. Robert (Morpeth)


Cove, W. G.
MacColl, J. E.
Thomas, David (Aberdare)


Craddock, George (Bradford, S.)
McKay, John (Wallsend)
Thomas, Ivor Owen (Wrekin)


Crosland, C. A. R.
McLeavy, F.
Thomson, George (Dundee, E.)


Daines, P.




Dalton, Rt. Hon. H.
McNeill, Rt. Hon. H.
Tomney, F.


Darling, George (Hillsborough)
MacPherson, Malcolm (Stirling)
Turner-Samuels, M.


Davies, Ernest (Enfield, E.)
Mainwaring, W. H.
Ungoed-Thomas, Sir Lynn


Deer, G.
Mallalieu, E. L. (Brigg)
Usborne, H. C.


Dodds, N. N.
Mason, Roy
Viant, S. P.


Donnelly, D. L.
Mayhew, C. P.
Webb, Rt. Hon. M. (Bradford, C.)


Ede Rt. Hon. J. C.
Mellish, R. J.
Weitzman, D.


Edelman, M.
Messer, Sir F.
Wells, Percy (Faversham)


Edwards', Rt. Hon. John (Brighouse)
Mitchison, G. R.
Wells, William (Walsall)


Evans Edward (Lowestoft)
Morley, R.
White, Mrs. Eirene (E. Flint)


Evans' Stanley (Wednesbury)
Morris, Percy (Swansea, W.)
While, Henry (Derbyshire, N.E.)


Fernyhough, E.
Morrison, Rt. Hon. H. (Lewisham, S.)
Whiteley, Rt. Hon. W.


Fienburgh, W.
Mort, D. L.
Wigg, George


Finch, H. J.
Moyle,, A.
Wilcock, Group Capt. C. A. B.


Follick, M.
Mulley, F. W.
Wilkins, W. A.


Foot, M. M.
Murray, J. D.
Willey, F. T.


Fraser, Thomas (Hamilton)
Neal, Harold (Bolsover)
Williams, David (Neath)


Freeman, John (Watford)
Noel-Baker, Rt. Hon. P. J.
Williams, Rev. Llywelyn (Abertillery)


Gaitskell, Rt. Hon. H. T. N.
Oldfield, W. H.
Williams, Ronald (Wigan)


Gibson, C. W.
Oliver, G. H.
Williams, W. R. (Droylsden)


Glanville, James
Orbach, M.
Williams, W. T. (Hammersmith, S.)


Gordon-Walker, Rt. Hon. P. C.
Paling, Rt. Hon. W. (Dearne Valley)
Wilson, Rt. Hon. Harold (Huyton)



Paling, Will T. (Dewsbury)
Winterbottom, Richard (Brightside)


Greenwood, Anthony (Rossendale)
Plamer, A. M. F.
Wyatt, W. L.


Grenfell, Rt. Hon. D. R.
Pannell, Charles
Yates, V. F.


Griffiths, David (Rother Valley)
Pearson, A.
Younger, Rt. Hon. K.


Griffiths, Rt. Hon. James (Llanelly)
Peart, T. F.



Hale, Leslie
Price, Joseph T. (Westhoughton)
TELLERS FOR THE NOES:


Hall, Rt. Hon. Glenvil (Colne Valley)
Proctor, W. T.
Mr. Arthur Allen and


Hall, John T. (Gateshead, W.)
Pursey, Cmdr, H.
Mr. John Taylor.


Hamilton, W. W.
Reeves, J.

Clause ordered to stand part of the Bill.

Clause 33 ordered to stand part of the Bill.

New Clause.—(REDUCTION OF ENTERTAINMENTS DUTY.)

There shall be substituted for the third scale of entertainments duty set out in Part II of the First Schedule to the Finance Act, 1952, the third scale of entertainments duty set out in

the Schedule (Entertainments Duty—Third Scale) to this Act.

Provided that as respects payments for admission to entertainments described in subsection (3) section two of the Finance Act, 1952, held before the nineteenth day of July, nineteen hundred and fifty-three, the third scale shall consist of the rates set out in Part II of the First Schedule to the Finance Act, 1952— [Mr. H. Wilson.]

Brought up, and read the First time.

Mr. Harold Wilson: I beg to move, "That the Clause be read a Second time."
I take it that it will be in order at least to refer to the Schedule which is proposed, because it would not make very much sense to discuss the new Clause without discussing the Schedule. The detailed changes which we propose in the duty as it relates to cinemas are set out in the Schedule, of course, and not in the new Clause, and the effect of the Clause is to propose an alternative scale to that which was inserted by the Government during the Report stage of the Finance Bill of last year.
On that occasion, apologising for the late entry of the Government Amendment on to the Order Paper—which we all understood—the Financial Secretary said that last year, and as it happened in the last two years, it had not been possible to obtain the final views of the industry until almost the last minute. That was, of course, due to the cat-and-mouse treatment of the industry by the Treasury.
Whatever may have been the position last year, there is no question that this year the Treasury has had the trade's views before it and, of course, the proposals which are included in the new Clause, at a very early stage, some months before the Budget was opened by the Chancellor, and I think the whole Committee will recognise that these proposals which were made to the Treasury some months ago are in no sense a bargaining bid. There was no question of asking for a very big concession in Entertainments Duty which, after considerable discussion and various changes, and after debates in Committee and on Report, would finally be whittled down to some compromise proposal. This new scale was put forward at that time as something which is reasonable and very modest in its effects on the revenue, and I hope the Chancellor will agree that the proposals should not be whittled down, as was the case last year.
The surprising thing, in view of the early stage at which these proposals were made, was that no reference was made to them in the Chancellor's Budget speech. Despite that, these proposals have been formulated and there have been several offers from the trade to discuss them with Ministers or representatives of the

Customs and Excise. At any rate, there is one thing on which we can all congratulate ourselves, and which I hope will make the debate slightly easier; there is no disagreement on the figures. There is no disagreement on the approximate cost to the Treasury of the tax amendments which are proposed by us this evening.
Answering a Question put by my hon. Friend the Member for Attercliffe (Mr. J. Hynd) on 19th March, the Chancellor said that the Treasury estimate of the cost of these proposals was £3¾ million, compared with the estimate of the trade of £3.7 million. I think we can say that those two figures are roughly the same and so there is progress in that direction at any rate. If the Financial Secretary had been a little less sure of the accuracy of his figures last year we might have made more progress then. There was disagreement, as the hon. Gentleman will recall.
I remember saying then, on the Report stage, quoting the "Economist" that the exhibitors were more likely than the Treasury to be right about the cost involved though I recognised that there was a considerable margin of error in any case. According to Hansard, the hon. Gentleman "indicated dissent," and put his faith in the accuracy of the Treasury estimate. I warned the Treasury at that time that they were likely to lose a lot of money on their own proposals because those proposals were not realistic in terms of the particular charges for particular levels of seat prices.
One has only to ask what has happened. Answering a Question I put, the Chancellor said on 21st April that the yield last year was actually £37¾ million compared with the estimate he had made earlier of £39·35 million; a loss of £1·6 million. But, as I have said, this year at any rate there is no disagreement about the cost of the proposals we are moving.
This new Clause is estimated to cost about £3·7 million or £3·75 million on the present basis of admissions. Admissions may fall and in fact they are falling, and there is nothing in our Clause which is likely to increase admissions—I will come to that point in a moment—except that it will be likely to prevent future bankruptcies in the cinema industry, a point which should be in the mind of the Chancellor. We can then accept the figure as


the difference in a full year between the present level of taxation and the level which will be in force if our new Clause is accepted. The cost for this current financial year—I think that again the Chancellor will accept this estimate—is about £2½ million.
5.45 p.m.
I do not need to remind the Committee that the effect of Entertainments Duty on cinemas has been debated almost every year since the war and generally about this time of the year. In fact, I could produce a sheaf of quotations, which would be embarrassing for certain right hon. and hon. Gentlemen opposite, revealing the savage attacks that they made at various times on what they have called the iniquities of this Entertainments Duty. One thinks particularly of the right hon. Gentleman, now Secretary of State for the Colonies, who, year after year, in debates on Finance Acts and on the cinema industry, and at other times, has made slashing attacks.
One has only to turn back to the Finance Act debates of two years ago, when the then Opposition spokesman, now translated to another place, Lord Hudson, made a most passionate speech for altering the Entertainments Duty. We recall the speech of the hon. Member for Rushclifle (Mr. Redmayne) who now sits on the Government Front Bench. I am not sure whether he is a Lord Commissioner of the Treasury or an Assistant Whip, unpaid, but that is where he sits.
He said:
It is not beyond suspicion in the minds of a great number of people in this country that Socialism wants to drive out the small man in every branch of enterprise. I think that the Chancellor now has a chance, if he wants to take it, of proving that he has some claim to anything but the bitterest criticism and opposition from the small men in every trade and enterprise in this country, and I believe that in the cinema industry that class is as wide as in any other enterprise."— [OFFICIAL REPORT, 5th June, 1951; Vol. 488, c. 950.]
I take it that if he still holds that view he will support this new Clause today. The hon. Baronet or the hon. Baronet-designate—I am not quite sure which it is— the Member for Croydon, East (Sir H. Williams) said on the same occasion that taxation on this form of entertainment had gone beyond the economic limit, that was the real issue.
The Economic Secretary himself who, on that occasion, spoke from the Opposition back benches, and who spoke, as he always does, with a great knowledge of the cinema industry, because so large a part is concentrated in his division, said:
We must consider whether the position has now been reached when official taxation will lead to diminishing returns.
He went on:
Turning to the exhibition side of the industry. I think it is quite clear that the position of the exhibitors has been seriously deteriorating … The figures I have been given show there has been a substantial drop in gross box office receipts in the commencing months of this year.
That was 1951, and the hon. Gentleman knows there has been an even more serious fall in box office receipts in the commencing months of this year.
He went on:
The only other point I want to make is the one raised earlier by my right hon. and gallant Friend the Member for Gainsborough (Captain Crookshank)"—
yes, the Leader of the House was in this business two years ago and should be lending his support to our Amendment—
… it is the method of taxation of this industry which combines the provision of revenue with the operation of price control.
The Government have done nothing to alter that in the last two Budgets.
I do not believe that we shall ever succeed in solving this problem while maintaining the essentials of the present system intact. It may have worked in the past, but with the present rate of duty "—
that is, in 1951—
it appears to be becoming unworkable."— [Official Report, 5th June, 1951; Vol. 488? c. 956–8.]
Lastly—I shall not weary the Committee by embarrassing too many Members opposite—there was the present Secretary of State for the Colonies, who wound up the debate and said he wanted to object to the level of Entertainments Duty for three main reasons. He said:
First, we think that the law of diminishing returns is beginning to operate, quite violently. … It also affects the amenities of the cinema-going public in the picture houses. The second reason why we are against this Clause is because we wish to draw attention to the cinema jungle and jumble which everything the Financial Secretary said presupposes is to be perpetuated.
Of course, the then Financial Secretary was my right hon. Friend the Member for Battersea, North (Mr. Jay).


The third reason is that there are very great anomalies in levying these duties."— [OFFICAL REPORT, 5th June, 1951; Vol. 488, c. 959.]
Every word said in those days, though there was good reason for the conditions then—the situation in the cinema industry was nothing like it is today—is true now, and true to a much greater extent.
My right hon. Friend the Member for Leeds, South (Mr. Gaitskell), like Sir Stafford Cripps before him, resisted some of the extreme views of right hon. Gentlemen opposite. We did not believe, for instance, that the ills of the industry could be
cured by sweeping remission of Entertainments Duty. It was calculated that to help the producers to the tune of £1 million a year would have meant a reduction in Entertainments Duty of £10 million, because of the losses and leakages and seepages at various stages before the money came through to the production side of the industry.
Therefore, in our film policy we concentrated on other means, on a process to reduce the cost of production by the National Film Finance Corporation—a piece of nationalisation which I am delighted to see the Government have decided to maintain for another three years because of its great success. We also devised the National Film Production Levy which channelled revenue direct from the box office to the producer, instead of by the more costly methods which some hon. Gentlemen opposite had been proposing.
Our new Clause today is not related to the production side of the industry except of course in so far as its passage would help in creating the confidence required in the very difficult negotiations due to take place before long on the future of the film production levy. Of course, indirectly it has a bearing on film production because if there were to be any large-scale closure of cinemas on economic grounds, that would have a serious effect on British film production.
The new Clause arises—and there is no inconsistency with the views and statements of Labour Chancellors of the Exchequer—because of the present financial position of the exhibition side of the industry, and the present situation is a great deal worse than it was when my

right hon. Friend had to reply to a debate on Entertainments Duty two years ago. I do not think there can be any argument about the present state of the many exhibitors in this industry.
I do not think anyone has ever accused me of any undue tenderness to exhibitors when I was at the Board of Trade. Indeed, most of the criticisms were all the other way round. But I must admit to being moved on seeing the independent figures—and, no doubt, most hon. Members have seen them—about the present finances of the exhibiting side. I want to make it clear that I am not talking about the big circuits. If we had been considering the position of the big circuits alone or mainly, we should not have brought forward this new Clause. We are considering a very much larger number of small cinemas, particularly in the very remote areas.
The Committee will know of the figures produced, and so far as I know never challenged, by Messrs. Stoy Hayward, the accountants, covering the year ended 30th June, 1952. These figures cover the whole trade—4,570 cinemas—and they are framed on two alternative bases. For the purpose of this discussion I think the convenient hypothesis to take will be that every exhibitor was the lessee of his cinema premises, or alternatively that every exhibitor was the owner but was setting aside a fair notional amount in respect of rent.
On that basis there was a deficit of £1,406,600 in the year ended 30th June, 1952—about £1·4 million—against gross takings of £109·6 million, but of course gross takings included tax, levy and many other expenses, and the exhibitors' share after the tax, the levy and film hire was about £44·65 million. We have to compare that with a deficit of £1,406,600. Lest there should be a disposition to compare the bases of these figures, I should say that the rent figure taken was equivalent to 3·2 per cent. on the replacement cost of the cinemas, which I do not think many people would be likely to regard as excessive.
That was the financial position of the cinema industry taken as a whole, some parts of it no doubt profitable and others in a very serious position, in the year ended June, 1952. Those figures are now more than a year old. If we could say that since that period the position


had improved, then our case would be very much weaker, but in fact, as the Committee know, the position has deteriorated since the end of the year to which the Stoy Hayward figures relate. If we take the six months November to April last year, and if we take the monthly tax receipt figures issued by the Board of Customs and Excise, we find that there was a fall from £19·83 million in the period November to April, 1951–52, to £18·36 million in the six months November to April of last winter. That is a fall from the winter before last until last winter of over 7 per cent.
Indeed, the position within that period was getting worse. If we take the first three months of this year, the cinema tax revenue was £9,446,000 against £10,267,000 in the same three months of 1952, a fall of rather more than 8 per cent. That means that there has been a fall of 8 per cent. compared with the year covered by the Stoy Hayward report, a report which showed that exhibitors were already showing a deficit on their working of about £1.400,000.
I suggest that there is no point this evening in speculating on the reasons for this falling off in cinema attendances and cinema revenues. There has been the decline in industrial production, of course. There has been the increase in short-time, the loss of overtime earnings, and higher food prices, leaving a smaller margin for entertainment. There has been particularly the increase in the coverage of television over a great part of the country. The plain fact is that whatever the causes—and we all have our ideas about them—the Treasury have now reached the position, as previous Chancellors did with the beer tax two or three years ago, described so eloquently by the Economic Secretary two years ago when he was anticipating a little the position of diminishing returns.
There is no doubt that before long the Chancellor will have to re-cast the Entertainments Duty system so as to permit a reduction in prices—not merely an improvement in the share going to the exhibitors—and by these means stimulate admissions in order to safeguard his own revenue. But as I have already said, this new Clause is not as ambitious as that. It is not directed to lowering seat prices and towards helping to stimulate

increased admissions. It is simply dealing with the problem of very many exhibitors in different parts of the country, particularly, but by no means confined to, Scotland, as a result of the present economic situation in the trade.
I do not need to tell the Committee of the already grotesque degree of discrimination which exists in Entertainments Duty and which is operating against the cinema industry and cinema attendances. We are all familiar with the fact that cinemas are taxed on admission charges up to 1s. while horse, dog and speedway racing and so on are free at that level—quite apart from the fact that cinemas have to pay in the form of a Film Production Fund levy. At 1s. 6d. the cinema pays 6d. to the Chancellor of the Exchequer while speedway and other racing and the rest pay 2½d. At 2s. the cinema pays l0d. out of the amount paid by the cinema-goer while anyone paying 2s. for a seat at some of the other entertainments that I have mentioned pays only 4½d. to the Chancellor of the Exchequer.
We are not suggesting in this new Clause wiping out this anomaly entirely. Indeed, we go only a very small way in the direction of reducing the differentiation in taxation between cinemas and other forms of entertainment. If this new Clause
is accepted the 1s. seat will still bear 2d. tax whereas, as I have said, the other forms of entertainment will pay no tax out of their 1s. admission fee. If this new
Clause is accepted there will, on the 1s. 6d. seat still have to be paid 4¾d. against 2½d. in the case of those patronising other entertainments. On the
2s. seat 9d. will still have to be paid against 4½d. paid by the other entertainments. This new Clause, which should commend itself to hon. Members in all parts of the Committee, differentiates between these forms of entertainment very considerably compared with some which were moved by hon. Members opposite when they were in opposition.
6.0 p.m.
One of the great qualities of this new Clause is that the easements are concentrated especially and to a very high degree on the cheaper seats, and, of course, for that reason, they are of most direct benefit to the smaller cinemas and the cinemas in the most remote areas.


small villages, small industrial towns and so on. For instance, the 9d. seat would be free under these proposals, on the l0d. seat there would be a reduction of ¾d. in the Duty, and on the 1s. seat there would be a reduction of 1d.; on seats priced at from 1s. 3d. to 1s. 6d., the reduction would be l¼d., and, going above that level to seats priced at 1s. 9d. and 2s., there would be a reduction of 1d.: at 2s. 3d., a reduction of only £¼.; at 2s. 6d., a reduction of ½d.; at 3s., no reduction; at 3s. 6d., a reduction of ½d., and at 4s. a reduction of ¼d.
These rather odd fluctuations in the last part of the scale are an attempt on our part to clear up some of the minor anomalies and maladjustments in the present scale of cinema taxation, but the main effect of the proposal is that the biggest reductions in taxation would be on seats priced at round about 1s., 1s. 3d. or 1s. 6d., where the reductions are from 1d. to l¼d., whereas the duty on most of the more expensive seats is reduced by about ½d. or ¼d., or, in some cases, is not reduced at all. This concentration of our interest on the cheaper seats means a very great relief to the small cinemas, which, on the whole, are by far the worst hit in the present economic state of the cinema industry.
I have been looking at some returns published more than a year ago by the Board of Trade. When I first went to the Board of Trade, I should like to tell the Committee, I found that there were almost no statistics about the cinema industry, and I asked the statistics department to remedy that state of affairs. From time to time, about every quarter, since then, the Board of Trade Journal has carried detailed figures of great value, not only to the Government, but, I am sure, to those engaged in the industry.
In March, 1952, the Board of Trade Journal carried a table showing the charges made by cinemas of various sizes —up to 250 seats, from 250 to 500, and from 500 to 750 and so on. It is a very serious and ominous thing that the President of the Board of Trade seems to have stopped publishing these figures. Perhaps the Chancellor will inquire into the reasons for that, and I hope to get— though not this evening—an assurance that the Government will resume publica-

tion of these figures, because it is certainly rather serious that, when we have these important debates on cinema taxation, their publication should have been stopped.
Using the latest figures—those published in March, 1952, and relating to cinema attendances in September, 1951, which are still broadly accurate—we can see the very heavy concentration of cheaper seats among the smaller cinemas. For instance, if we take cinemas having fewer than 250 seats, we find that about 56 per cent. of the seats are priced at 1s. 6d. or less; taking those with a seating capacity of between 250 and 500, 64 per cent. of the seats are under 1s. 6d., while no fewer than 50 per cent. of them are priced at 1s. or under. Taking cinemas seating from 500 to 750, and we are still pretty well in the region of the small cinema, 67 per cent. of the seats are priced at 1s. 6d. or less. In the big super-cinema, holding 2,000 or more people, however, only one-third or 34 per cent. of the seats are priced at 1s. 6d. or less.
Since the main concentration of the easements of this new Clause is on these cheaper seats of about 1s. to 1s. 6d., it is easily seen that its main help will be to the smaller cinemas, which have about two-thirds of their seats priced at the level of 1s. 6d. or less, whereas the amount of easement to the big cinemas and circuits is very much smaller by comparison.
If we take the matter further and consider seats priced at 2s., we have to estimate, because the figures are not very clear, but it appears that about 85 per cent. of all seats in smaller cinemas up to 500 were priced at 2s. or less. I cannot give the accurate figure for seats between 2s. and 2s. 6d. and one has to make an estimate, but it is this particular price level which will gain most from the operation of this new Clause.
I do not know whether it is necessary to give evidence of the smaller cinemas being the hardest hit, but I think that all hon. Members of the Committee will be aware from the cinemas in their own constituencies, and particularly those in the more remote parts of the country, that they are hit far more seriously than some of the big cinemas, especially those in the bigger circuits. The Stoy Hayward Report showed that, out of 4,570 cinemas of all sizes, 3,746 showed a loss on film


exhibition in that year. The average cinema, according to the basis I have mentioned, showed a loss of from £800 to £1,000 for the year for three groups whose seating capacity ranges from 500 to 1,250, whereas in the cinemas of larger capacity there was a profit of £1,000 to £1,100 for cinemas seating between 1,500 and 2,000 and a profit of £2,300 for the biggest cinemas seating more than 2,000 people.
This new Clause is designed to help those which are most in need, and particularly those which fulfil the important role, as we all agree, of providing entertainment in the smaller towns and villages and the more remote industrial and mining districts, which are too far from the large towns to be able to be served by the larger cinemas and circuits. The new Clause is not put forward purely on the responsibility of the exhibition side of the industry. It is a very important fact that the Cinematograph Films Council, which is a statutory body established by this House, passed a resolution which, as far as I know, was carried without any vote to the contrary, supporting the point of view which has been put forward this evening and, with the leave of the Committee, I should like to quote a few words from that Report:
When the British Film Production Fund was established and when it was subsequently revised, the terms were agreed to on certain expectations as to the share of the receipts from the adjustment of prices then negotiated which would be left with the exhibitors to assist them in meeting increased costs. These expectations have not been realised. The net position is that a large proportion of exhibitors, faced by the rising cost of operation, are confronted by a serious deterioration in their financial position, so far as their operations as exhibitors are concerned.
The Cinematograph Films Council is satisfied that Entertainments Duty must be reduced. It wishes to register its great disappointment that recent reliefs which have been granted or announced have not been extended to the cinema industry.
For 25 years, successive Governments have committed themselves to the policy of promoting the British Cinematograph industry. The council is not aware of any similar commitment in relation to, for example, dog racing. It does not think it is consistent with expressed policy that tax on the cinema industry should be the highest on any form of entertainment.
In moving this new Clause, we have been more moderate than the Cinematographs Film Council in that we have not sought to remove the whole of the differential element in this discriminatory taxation, but have only gone a small way

towards reducing it. I think I can say— though I prefer to leave this to my hon. Friend the Member for Nottingham, North-West (Mr. O'Brien)—that these proposals are supported by the workers in the industry in whose interests, of course, my hon. Friend has been very active in raising the miserable standards which many of them experienced not so many years ago.
I mentioned a few minutes ago the worsening, since the Stoy Hayward Report, of the matter of cinema attendances. From the financial point of view we must also take account—in comparison with the time of the Stoy Hayward Report— of the wage increase of £1 million, for which, I think, my hon. Friend was largely responsible, an increase which was by no means premature or excessive, but which adds to the difference in the economic position of the industry since the publication of the Stoy Hayward figures which, as I have already shown, reveal a very serious state of affairs.
I think that all of us recognise, as we have for many years, that it was not easy in the past few years for Chancellors of the Exchequer to give relief in Entertainments Duty on cinema seats, but in this Bill we see a whole string of major concessions in taxation which have been granted by the Chancellor this year. We on this side of the Committee think that they have been wrongly devised and given with a very wrong sense of priority. I would certainly not support this new Clause if it were a question of either having the Clause or an improvement in the position of, say, old age pensioners. But that is not the issue before us. Compared with the reductions granted in this Bill, a large part of which have already been dealt with by the Committee, the case for the new Clause is overwhelmingly strong.
In the preparation of this Bill the Chancellor has made concessions in taxation for television purposes. He has cheapened the cost of television sets by reducing the Purchase Tax. We have to face the fact—and many hon. Members can speak of this from a constituency point of view with more authority than I can from the point of view of my constituency—that there are many millions of people in this country to whom the Government still denies television coverage, and millions of people who cannot


afford television sets and who have to rely for their entertainment on regular or irregular visits to the cinema. Therefore, on this ground also there is in equity the strongest case for the Government agreeing to accept this new Clause. I hope that when the Chancellor replies to the debate he will tell us that the Government are going to accept the Clause and thus give the cinema industry a better hope of survival than it would appear to have at present.

6.15 p.m.

Mr. W. G. Bennett: I believe that everyone, including the Treasury, is agreed that the cinema trade is having a bad time, particularly the smaller halls. While I propose to speak for the trade as a whole, I am especially interested in the present position of halls with a seating capacity of from, say, 600 to 900. I recently received a balance-sheet from a small circuit with five halls which had already closed two of them—one of them in my own division —and which was proposing shortly to close another unless the Chancellor agreed to give some relief in the rate of tax.
The small hall which is likely to be closed showed an adverse balance for the year ended January, 1953, of £197, while the Treasury had taken from it during the same period roughly £500. If this remission of tax were granted, it would allow a balance of £300, most of which would go on renovations. I visited the place and found that it had not been painted for several years simply because there was no money available.
This concession, if granted, would not cost the Treasury any money at all. On the other hand, if it is not granted, at the end of the day the Treasury will be the losers. If this hall were to close within the next few months the Treasury would lose the £500. The wage bill of the hall is something slightly over £30 a week, and there are seven employees. If those seven employees are thrown on to Public Assistance or unemployment pay that, again, will affect the Treasury. If the hall is empty the local taxes will also suffer. There would be a continual loss on every hand. From that point of view alone I believe that the question is well worth the Chancellor's consideration, and, I might almost say, bounty.
In seven out of nine of the larger cinemas in my division, the average price of a seat is 1s. 6d. I understand that it is impossible to provide a seat for 9d. and at the same time pay the Treasury even a halfpenny and still show a profit. The profit has to come from the higher priced seats. With seats priced at 9d., 1s. and 1s. 6d. there is very little on which to come and go, so that the majority of the halls in working class districts are living very close to the border line at the present time.
When I inquired into the cost of renovations and repairs, I was amazed to find that whereas the replacement cost of a cinema seat in 1938–39 was 19s. 9d., today's price is £5—five times the cost. The cost of carpeting the passages—and it must be strong and good quality carpet —is £5 a square yard today compared with, roughly, £1 a square yard before the war.
With costs such as these, one can well understand that renovations, alterations and the keeping up of a decent standard are a very costly business. Cinemas must be kept up to certain satisfactory sanitary standards. Painting costs a great deal of money today, and many cinemas are actually in need of the sanitary inspector's supervision.
Sometimes a man will go to a football match on Saturday and pay 1s. 6d.. out of which the Treasury gets 2½d., but his wife and two daughters will go to the chinema and pay the same price, and they each will contribute 6d. to the Treasury. A very strong case can be made out for relieving the entertainment of the wife and the two daughters. Last year my right hon. Friend the Chancellor of the Exchequer made a concession to certain other forms of entertainment; a strong case can be made out this year for the cinemas.
We have heard how the Chancellor of the Exchequer came to the help of the textile industry by his Budget proposals because the industry was suffering great depression. It now shows a wonderful improvement. If it is good for that one industry to have assistance in its time of trial, is it not worth the Chancellor's while to consider relieving the cinema industry, which will cost only £2½ million this year and £3¾ million in a full year?
I plead the cause of the small man in the cinemas in working class areas. Other


hon. Members have material and statistics to give the case for the industry as a whole. I have nine cinemas in my constituency, only two of them charging more than 1s. 6d. One of those charges 2s. 1d. and the other 1s. 9d. They are all finding it very difficult to carry on, and I would ask the Chancellor to give this matter his very serious and anxious consideration. I am looking forward with very much hope to the result of this debate.

Mr. T. O'Brien: My right hon. Friend the Member for Huyton (Mr. H. Wilson), has made my task, and, indeed, the task of those who are, like myself, supporting the Clause, very easy, or at least easier than it would otherwise have been. In a magnificent review he surveyed the problem in all its aspects. If this were a public meeting and not a Committee of the House of Commons I would get up and thank my right hon. Friend very much, and move a vote of thanks, and then sit down.
Very little can be added to the effective arguments that he has advanced, but I would take the opportunity of dotting the "i's" and crossing the "t's," as I plead with the Chancellor of the Exchequer for his serious reconsideration of the attitude of the Government towards Entertainments Duty as it affects the cinemas.
Last year, the Financial Secretary to the Treasury, as he will remember, challenged the cost of the proposals I submitted. This year, fortunately, there is an agreement, a welcome agreement, with the Government. The trade know exactly what the proposals are to cost. I do not think there is any dispute about what the proposed new Clause means, or that the cost will be about £3¾ million.
I do not think it can be disputed that cinema takings and attendances are decreasing. Much has been said in this Committee about the small cinemas and the smaller levels of prices of admission, but attention must be paid to the fact that prices of admission in cinemas, even including the high scales of Entertainments Duty, are not by any means the highest in the world. They are reasonable, and if they were cut to any large extent there would be a serious risk that

the wages bill in the industry could not be paid, apart from the money required for renovations.
There are two factors to which I would like to draw the attention of the Committee. The first was referred to by the hon. Member for Woodside (Mr. W. G. Bennett), when he mentioned the difficulties of having cinemas renovated. Looking at the matter from the selfish point of view—the Committee will be aware of my interest in the industry—it is a good thing that exhibitors cannot afford to re-carpet, re-seat and renovate their cinemas. If they were obliged to do so there would be no money left in the industry. I am serious when I say that. This film industry has long left its eldorado stage. It is no longer the paradise of industries, everybody's milch cow. It is going through serious difficulties.
As a matter of fact, on the production side today, on which subject I have addressed hon. Members on more than one occasion, were it not for a voluntary arrangement made about the Eady Levy, there would be no British film production in this country. Governments, whatever their political party, must remember that it is very serious to go on taking taxation from an industry that stands the risk of going out of existence in the near future. It is not good enough for Governments to say that the industry can stand this continual high taxation. It cannot. It has tremendous responsibilities to its workers and to the public and it will not be able to carry on.
On the question of the competition that the industry is facing, it is generally known that the development of television is a large factor in the diminishing attendances. That has been proved in the United States to a very serious degree. My latest information is that nearly 3,000 cinemas in the United States have been closed as the result of changes in entertainment taste, largely due to television. If to B.B.C. television is added the further risk of sponsored television, I do not see how many small cinemas will continue to operate.
Many of the large cinemas in this country will have great difficulty in operating successfully and efficiently if further competition is developed of the kind now experienced. The development of the third-dimensional experiment may prove to be merely a passing fancy. It may


not. These technical developments in cinema presentation may go on until they compel exhibitors to reconstruct their cinemas and to purchase colossal new equipment if they want the performances to go on.
In face of all these real risks and difficulties, the Government should look upon this matter not merely as one of having to pay another £3 million or £3½ million. It is monstrous that any Government can so discriminate with Entertainments Duty that it is considered just and fair for one of us to go to a dog race, horse show, football match, or any light entertainment, and pay 1s. admission without any entertainment tax at all, but when members of the working class pay 1s. at a cinema, tax is levied upon that sum.
I beg the Chancellor to remember that the industry as a whole is reaching a stage —I say this with a full knowledge and responsibility of what the words will mean and of the risks of their being misrepresented—when it will not be able to afford the payment of a basic economic wage to its employees.
I have negotiated on behalf of cinema technicians and cinema workers for nearly 30 years and I know the difficulties that have been experienced in getting exhibitors to apply a fair mind in this matter. But those years have gone. The profits that were made in those years are no longer being made, and whereas it is not the function of the Chancellor of the Exchequer to see that fair wages are being paid it is his responsibility to avoid taking money out of the industry that should go into the pockets of its workers.
6.30 p.m.
By the efforts that my organisation have made since the war we have abstracted from employers wage increases amounting to about £6 million to £7 million since 1945. Our recent increase is costing the industry £1 million. The one before that cost the industry nearly £1,750,000. Yet with all that, the average basic wage of cinema employees is below what the trade union movement regards as a subsistence level. There have been 10,000 dismissals of full-time employees in the industry during the past three years. Some of that full-time employment has been converted into part-time. Men and women in the cinemas are losing their livelihood every

month and are going on part-time work. It is a problem with which my organisation is trying to deal in conjunction with the exhibitors.
The average wage for full-time male staffs in theatres, doing technical and non-technical work on a 48-hour-week basis, does not reach £5. There are some groups of cinemas, but they are very few, where there is a decent wage of about £7 10s. to £8. They are well in the minority. The Committee should take note of the fact that the overwhelming majority of cinema workers on full-time pay do not earn £5 a week. The case of the female wage earners is considerably worse. They work between 44 and 48 hours. In the main their employment works out at a 48-hour-week for which the average wage is about £3 10s. to £4 a week.
If we have taken all these years to raise the wage standards in an industry which was regarded as notoriously rich, one can imagine what the wage standards were before the war. It has been the task of some of us on this side of the Committee and of the trades union councils of this country for many years to try to bring the cinema workers, that body of hard working men and women who try to serve the public after their customers' working day is done, some kind of fair play.
The leaders of the industry, of the large circuits and the small exhibitors, the officers and executive committee of the Cinematograph Exhibitors' Association, are all seriously and genuinely bending their efforts and their minds to try to put the wage problem of the industry in order. The attitude of the industry today is far different from what it was 20 or 30 years ago. I am satisfied, and so is my executive, that there must be a reduction in the amount of money that is taken out of the industry by the largest abstractor, the Chancellor of the Exchequer. That nearly £40 million should be going out of an industry with a turnover of £105 million to £110 million is not good enough. That sum is far too great having regard to the difficulties that face the industry.
There is another aspect which is not really before us this evening but which bears on this question. The exhibitors have to find over £500,000 a year additional money for the privilege of opening on Sundays. Evidently one's soul is clean


of any sin of opening a cinema on Sunday if one presents a certain amount of the takings to the local watch committee or some other organisation. There seems to be a long queue, a long line of beneficiaries from the takings of cinemas. Part of my case today is to say that the first priority claim on the proceeds of the cinema industry is that of the people who are working in it. They should be given a square deal first. The employers and the trade union concerned are getting together and I ask the Chancellor to be generous in his help. It is not his job to see that trade union agreements are effectively negotiated, but I hope that he will at least consider this aspect and give employers the opportunity of paying what we regard as an acceptable, decent, modern wage.

Colonel Sir Leonard Ropner: During the last few weeks I have had the opportunity, indeed the privilege, of going fairly closely into the finances of the film industry with representatives of the producers and exhibitors and renters and other sections of the industry. They all agree and propose that there should be a reduction of taxation, and I believe that they made out a fairly good case. I assume that all hon. Members would desire to see the film industry survive, and I think we should all like to see it flourish. I remember hearing, a few years ago, that the United States was a second-rate nation until the cinema was invented. There is an element of truth in that remark. There is no doubt that a prosperous film industry is not only of national but of international importance to this country.
The Chancellor of the Exchequer is taking just about 40 per cent. of the gross takings of this industry and that is a "socking great chunk" out of any revenue, and particularly the revenue of an industry which is going through rather difficult times. I know that this new Clause, which was so ably moved by the right hon. Gentleman the Member for Huyton (Mr. H. Wilson), primarily affects the income of exhibitors, but, of course, it is the cash that goes in at that end of the industry that ultimately finds the money for the producers and other sections of the industry. That is the pool from which all sections hope to derive their livelihood and make the industry a success.
I have been struck particularly by the case which can be put forward for the small cinemas. There are a number of these cinemas in my constituency and there are a great number in the country. I believe that they are having a very hard time indeed. But I feel that I need add nothing to the arguments which have been used on their behalf by right hon. and hon. Gentlemen opposite and by my hon. Friend the Member for Woodside (Mr. W. G. Bennett). In case I should raise false hopes in the minds of those who are sponsoring the new Clause I should make it clear, however, that I shall not vote against the Government on this issue this evening, but I hope that the Chancellor has been as impressed by the arguments as he should have been.

Mr. John Rankin: In view of the tone of the hon. Member's speech in support of our case and his declaration that he would not vote against the Government, will he abstain?

Sir L. Ropner: The hon. Gentleman had better wait and see, but I could not even raise his hopes to that extent.
Even if the Chancellor of the Exchequer cannot meet the substantial arguments which have been raised in this debate, I hope the impression they have made on his mind and on the Treasury is so great that he can lead us to expect that they will be remembered and that some effect will be given next year to the plea which is made by this new Clause.

Mr. J. Grimond: Most of the arguments which can be advanced in support of this new Clause have already been effectively made, but I want to emphasise what was said by the hon. and gallant Member for Barkston Ash (Sir L. Ropner). It is curious that successive Governments have, on the one hand, recognised the national importance of this industry and gone out of their way to help it while, on the other hand, they have taxed it in excess of all comparative forms of entertainment and they now take 40 per cent. of its falling revenue.
It cannot be emphasised too often that when these new Clauses and Amendments are moved year after year they are not moved for the sake of obtaining any concession or Government assistance for


this industry, but with the object of reducing the discrimination which is made against it. Whatever arguments there may be against a reduction in taxation just now, it is certainly very anomalous that this discrimination exists against an industry which is unquestionably facing a very difficult future.
Probably no one who supports this new Clause would argue that it will go anywhere near solving the problems of the cinema industry. There is no doubt that the industry itself has to do a great deal of fresh thinking. I often think it does itself a very bad service by its publicity. The public still know of it only through its film stars, champagne, world premieres, and so on, and it is extremely difficult to convince the ordinary taxpayer that this is a poor man's industry and a form of entertainment, which, at least in many parts of the country, is up against it; that many cinema circuits are making a loss and certainly cannot maintain their houses at a decent standard.
I want to stress the undoubted fact that in many places this is the normal form of entertainment for the normal family. There are very civilised parts of the country—not perhaps very central— where there is no dog racing, horse racing or television, and there is unlikely to be any for some time, and where the family amusement of the poorest people is still a visit to the cinema. It cannot be argued that this is an improper form of amusement; presumably this discrimination is not made on moral grounds. The industry has set its house in order and it is now a perfectly proper and healthy form of entertainment. If one lives in certain areas there is certainly an advantage about having entertainment under cover. However healthy dog racing may be in some cases, it is not healthy in others.
Apart from the obvious case which can be made out for the industry, I would stress the unfairness which is laid upon some people in some places by the high rate of taxation. It is also true to say that the industry will suffer additional difficulties through the falling off in sales of chocolates and ices in its cinemas.
I support what has been said by the hon. Member for Woodside (Mr. W. G. Bennett), that there has been enormous increase in the cost of decorating cinemas, which has fallen very severely

on smaller cinemas and circuits and which, added to the other difficulties, makes it very difficult for them to carry on. If they cannot carry on we are depriving many people of their basic form of entertainment and we are also depriving the Exchequer of a substantial amount of revenue.

Mr. Charles Williams: The hon. Member for Nottingham, North-West (Mr. O'Brien), deliberately and rightly, emphasised how low are the wages of the people working in the cinema industry. I am sure the Chancellor of the Exchequer realises that, but I have been amazed in the last two years to hear how low these wages are as compared to those of the ordinary person, and that is a point which the Chancellor should bear in mind. I do not support this Clause, because a Clause which takes quite such a long, complicated and involved speech, which has very little to do with the subject—a speech such as we had from the right hon. Member for Huyton (Mr. H. Wilson) who put it forward—cannot demand much confidence from anyone who looks at it from a wide and impartial point of view.
There is one point which the Chancellor should look at. There is an anomaly in the case of the small cinemas, especially in rural districts. One cinema gets off very largely because of its rural or supposedly rural agricultural condition, while another, in almost precisely the same kind of town, within a few miles, does not get off. The Chancellor should look at that anomaly, coupled with the fact, which has been proved again and again, that the big losses are being made on the cheaper seats in these very small cinemas. I do not ask the Chancellor to accept this Clause, but he should consider the matter from that point of view
6.45 p.m.
Last year, when we were dealing with a similar subject, everyone was very disappointed because the Financial Secretary, in the course of a series of brilliant and intelligent speeches, suddenly seemed to put his hand into his drawer and pick out an awful speech of one of his predecessors and palm that on the Committee for no purpose. I hope that my right hon. Friend will not do anything of that sort but will give us a sympathetic and full answer, and see whether,


between now and the Report stage, he can make a real concession in respect of the small cinemas, or at any rate look at the question between now and next year.
I am astonished at the correspondence I have received on this subject. I have had example after example of small cinemas in the Highlands which are doing very badly, and examples can be given right through the country to the west coast of Cornwall. There may even be some in the islands. The fact is that many of the small cinemas which
are needed to keep together the people in our smaller towns are being put out of business. They are making losses and, in ever-increasing numbers, closing down which is not good for the revenue and not good for the people living in their districts.

Mr. A. Blenkinsop (Newcastle-upon-Tyne, East): I want very briefly to give an example of the type of small cinema that could very well be helped by this new Clause. I do not see why the right hon. Gentleman the Member for Torquay (Mr. C. Williams) should have taken the view that he cannot support it. It seems to me to be a very modest one, not making a very great call on the Exchequer. From what he said, I gather that the right hon. Gentleman really supports its general tone and provisions.

Mr. C. Williams: No, I do not support the new Clause. I support one side of it, so far as small cinemas are concerned. I do not think there is the least need of it for the big ones.

Mr. Blenkinsop: This Clause, as has been rather patiently explained, is rather carefully concentrated on making provision to assist the small cinemas without making any real provision at all for the larger cinemas. It is, of course, the small cinemas with which we are mainly concerned, and particularly the cinemas that are not members of one of the larger circuits, though they, too, have to face some problems.
The cinema I have in mind, which is. I am sure, typical of very many, is in an industrial area in the north of England. Its proprietors are the proprietors of this and only one other cinema. They have gone to a great deal of trouble to make reasonable provision for the people in their area. It is not an old cinema; it

was built comparatively recently, before the war, to serve particularly a large council housing estate.
The proprietors have done a great deal of valuable work for the people in that area, and have, like many other cinema proprietors, made special provisions for old people. It so happens that there is special provision on the housing estate for large numbers of old age pensioners, and special old age pensioners' houses. It is to the credit of the proprietors of this particular cinema that they have done a great deal to make it possible for them to get to the cinema fairly regularly.
They have made clear to me what, I am sure, is true of very many cinemas of the same size, catering for 700 or 800 people, that they just cannot go on on the present basis. They have to meet, very properly, increased charges for the staff. There are heavy charges for refurnishings, which are necessary even in a comparatively new cinema. In this case, as in so many others, the only charges to the public are charges of 1s. and 1s. 6d.
It is perfectly clear that a cinema of this sort cannot carry on indefinitely under the present rate of taxation, and I therefore appeal to the Chancellor to have in mind this type of cinema, and this type of proprietor, who is certainly doing his level best for the community he serves, in considering his reply to this debate. Even if the Chancellor is not able to accept the new Clause in full, although I do not see why he should not, I hope he will at least be able to tell us that he is considering the matter and will be able to make a reasonable and considerable concession.

Mr. William Shepherd: The Chancellor must have been impressed, as I have been, by the reasonable way in which the right hon. Gentleman the Member for Huyton (Mr. H. Wilson) and those who have followed him have put the case for the cinema industry. As the hon. Gentleman the Member for Orkney and Shetland (Mr. Grimond) said, it would, perhaps, have been to the advantage of the industry had they themselves presented their case with such reasonableness. I fear that one of the reasons why the Chancellor was not so forthcoming in his Budget speech on this issue as many of us wished was the unfortunate effect which some propaganda efforts of the industry have had on the public mind


and even on the mind of the Government. There has been far too much exaggeration in the case of the cinema exhibitors. They have always been at the door of the workhouse, but have never quite crossed over the threshold.
However, I make no bones about saying that today this industry finds itself in a really serious position which does demand some action on the part of the Government, action which is desirable and semi-necessary today and which will be absolutely necessary at this time next year. The industry today is in a grim position in the hands of the Chancellor. It has become a vehicle of taxation collection, and that is a grim position for any industry to be in.

The Chancellor of the Exchequer (Mr. R. A. Butler): Perhaps my hon. Friend will explain how this industry is more in the hands of the Chancellor than many others which are taxed to a far greater extent. I shall be interested to hear.

Mr. Shepherd: I was about to proceed with the argument to show the point of view I am expressing. It is this. I was written to the other day
by a man on behalf of dog racing. I wrote back to say I disagreed violently with dog racing socially, and that I hoped the whole of dog racing would close up. He replied that that might be my point of view, but what about equity? I wrote to him, "Whatever illusions you harbour, do not for heaven's sake harbour in your mind the illusion that the Chancellor is interested in equity."
The Chancellor's policy on this matter of taxation is one of grab. All I can hope is that the Chancellor will refrain from smash and grab, or, to put it in chronological order, from grab and smash. There is no question of equity here involved, and the Chancellor will take as much as he possibly can. He will take nothing from cricket if he thinks that cricket will not stand it; he will take something from dog racing, and something from the theatre, and an increased amount from the cinema industry.
Let us realise that the cinema industry is a very great source of revenue for the Chancellor. That, I have no doubt, is
its attraction for him. I admit right away that there is a complication in trying to

make the case for this industry, in that there is a sharp difference in the financial standing of the circuits and many of the independent exhibitors. The three big circuits and a number of small circuits are making handsome profits, and I can quite understand my right hon. Friend's saying, "Why should I add to the profits which are being made by those circuits, which are already substantial?" It is not an unreasonable point of view, but it is also true to say that the large circuits represent only a small proportion, about a third, of the total activity of the industry, and that the rest of the industry, in the main, is in a pretty serious condition.
It is ironical that this country, which has the largest cinema attendance per 1,000 of population in all the world, should find that its cinema industry is in so difficult a situation as it is at the present time. The situation is much more difficult than it has been made out to be so far in the debate. The industry does not pay its workers a fair and decent standard of living. There is no doubt about that at all. It pays as much as it can, but one does not pretend that the wages being paid are satisfactory and fair to the workers in the industry. Moreover, it does not maintain its premises in a fit and decent condition. Many of the cinemas are in a disgraceful condition and in need of substantial renovation. Therefore, the position of the industry is even worse than it appears to be from the figures that have been quoted.
I agree that there has been a great deal of exaggeration, and it irritates me when I hear people saying, as some exhibitors do, that they cinemas would not make a profit but for ice cream. A man showed me a balance sheet the other day which included all the expenses but only some of the receipts. I wrote back to him and said, "I like to see a balance sheet showing all the expenses and all the receipts, and if one runs a business like a cinema where there are incidental takings they must be recorded as part of the gross receipts." It is not satisfactory—indeed, it is nonsense—to show all the expenses but only some of the receipts, and to leave out receipts on the sale of such things as ice cream. All receipts should be included.

Mr. Hector McNeil: The hon. Gentleman is making a fair case. Would he agree that the receipts, which


he said he was entitled to see, are now likely to diminish in view of the derationing of confectionery?

7.0 p.m.

Mr. Shepherd: I am not aware of any serious diminution in those takings, but I regard it as less than fair when people try to put forward the case of an industry by showing some of the expenses and only some of the receipts. I do not believe it is true that the industry's takings are seriously diminishing. I understand that the takings for 1952 were higher than those in the preceding three years, the average weekly take being £2,140,000, whereas in 1950 they were £2,023,000. Therefore, it is not true, as some hon. Members have said, that the takings of the industry are seriously declining. They are very substantial and they are perhaps many times what they were in 1939. Neither is it true that the attendances at cinemas are unduly low; they are at least as high as they were in 1939, and they are the highest per capita in the world.
Despite these conditions, the relatively good sales of sweets and other things, and a rate of attendance which is still very high, the industry cannot pay its way. The simple answer is that, whereas in 1939 the tax collector took £107,500, he now takes nearly £800,000. The tax imposed upon the industry has gone up by over seven times. That results in the real difficulty in which the people who are running the industry find themselves. They are faced with increased taxes and increased expenses, and they have no margin for themselves on which to work.
It is not only the small cinemas which are facing financial difficulty. I want to cite the case of a cinema in my area which is taking relatively a lot of money. Its gross receipts were roughly the same in 1946 and 1952, being about £51,000. In 1946, the Chancellor took £17,600 from the gross receipts and the trading expenses were £14,000, but with the same turnover in 1952, the Chancellor's take had risen from £17,600 to £20,000 and the operating expenses had risen from £14,000 to £18,000. From what has happened to that cinema of substantial size we see what is happening to the industry; costs have risen and tax has risen to a point where the cinema cannot pay.
Like other hon. Members, I very strongly support the case of the small exhibitor. I wish that hon. Members opposite, in putting down the new Clause, had been able to find a method by which the small exhibitor could obtain the sole relief. There is a doubt about the case if one is going to assist the larger exhibitor. If we accept the social desirability of the small cinema, there can be no case against helping it, because it is undoubtedly in a position where it cannot carry on. I have heard some hon. Gentlemen in high positions talk about the small cinemas in a somewhat derogatory manner and say, "You tell us that your business is failing? Why do you carry on?" The answer is that they carry on only by means of a number of devices.
In an effort to keep the cinema going, the man may go out to work himself, or he may get his wife to do some of the work, which she ought not to be called upon to do in view of her family responsibilities. He may batten down the renters to the lowest form of hire to make the business pay, leave undone all the renovation which ought to be carried out, borrow from the bank—I have seen some of the balance sheets—and leave unpaid a number of bills which really ought to be paid.
We can be certain that the position of these individuals is indeed a difficult one. If we are to make the decision that we believe that they ought to exist, we must do something to help them. If the Chancellor takes the view that the small cinemas in the less populated districts are not to exist, then he has to say so and we might be able to start some redundancy schemes for the industry. But if, on the other hand, we believe that these people serve a very useful purpose and are socially desirable, my right hon. Friend ought to seek some means of helping them.
If my right hon. Friend cannot accept the Clause, I suggest that he accepts the reductions only up to 1s. That would be a very small charge upon the Revenue and it certainly would not be open to liability to abuse. That reduction would positively help all the small cinema owners and it would not be attractive enough for any of the larger cinema operators to bring their prices down. If my right hon. Friend cannot go as far as some of us would like him to go, I hope he will do something——

Mr. Blenkinsop: Does the hon. Gentleman refer to the 1s. charge to the public or to the net figure received by the exhibitor?

Mr. Shepherd: I am referring to the figure charged to the public. If my right hon. Friend went that far, there would be no likelihood of abuse and he would certainly do something to help those who are most hardly pressed. I hope he will try to do something. I am satisfied that, despite the over-emphasis and exaggeration which there has been, the small exhibitors have a really serious case. If we want to keep them in existence we must do something to help them now.

Mrs. Eirene White: I was most interested in the speech by the hon. Member for Cheadle (Mr. Shepherd), who, I think, knows nearly all the tricks in this trade. I was glad to hear his general deprecation, if not condemnation, of some of the propaganda which has undoubtedly been put out over the past few years by the industry. One can hardly approach an exhibitor without seeing his handkerchief raised to his weeping eyes. Nevertheless, I believe there is a case for reconsideration of the burden of taxation upon the industry.
I am fortified in this opinion by the fact that I have for some years served upon the Cinematograph Films Council whose business it is to advise the President of the Board of Trade. That body is drawn from all sections of the trade; producers, renters and exhibitors and the trade unions are represented on it, and it has also a number of independent members of the most varying political complexions. This heterogeneous body, after considering the matter, which is not the kind of subject which usually comes before it, felt that the present position in the industry was such that, although it did not generally presume to tender advice on financial or taxation policy, it would be right to send to the President of the Board of Trade, and ask him to remit it to the Chancellor, the opinion that there should be some reconsideration of the burden of taxation upon the industry.
Although the hon. Member for Cheadle said that attendances are still as high as they were in 1939, it is fair to say that they are showing a tendency to decline and that there is reason to suppose that

that tendency is likely to continue for some time. It is very difficult as yet to know precisely what the impact of television will be upon the cinema industry. I do not think we shall be able to say that with any certainty for the next couple of years at least, but there are some primary factors which we have to take into account.
For one thing the entire country is not yet covered, so one has not the complete national picture; and another thing, persons buying television sets on hire purchase have to reduce other luxury expenditure until they have made all the payments on the television set. When they have done that, who can tell? Will they prefer television, sponsored or otherwise, or will they once again wish to go out of their homes and go to the cinema. There will be a very interesting sociological study as to the effect of the impact of the two forms of entertainment.
I do not think we are in a position to know, but it will be obvious to anyone that the advent of television means that there is a very serious competitor with the cinema. The effect of that has been evident in some degree and it is likely, on any reasonable argument, that, because of the increase in television viewing, cinema attendances will decline. It is true that the cinema owners are very apt to put forward that argument—and I am very glad that the hon. Member for Cheadle dealt with it—that they are losing on films and have to live on the sales of ice cream.
Why should they not? After all, they have ample opportunities for selling their ice cream or sweets, which they can more easily sell now than before. I do not see why one should have any pity on cinema proprietors because they live to some extent on their ancillary lines. Why should they not, when the nature of their business makes it possible for them so to do? For that particular argument I have no sympathy whatever.
We are concerned not merely with the large exhibitors but with the small exhibitors, and I think there is a stronger case for them. But some of us are also concerned with the production side of the industry, and are much more interested in that than in the exhibitors. We are only interested in the exhibitors because, after all, they are the means of financing


production, and I cannot help feeling that if we continue to have the heavy tax burden on an industry which is declining rather than expanding, it will be more difficult to get the finances for any adequate production of British films.
At the moment, there is the Eady levy, which is imposed by the exhibitors under a voluntary agreement. Those of us who have the slightest acquaintance with the industry know that there have been many exhibitors who have been refusing to pay this levy, and in consequence the trade has been taking restrictive action against the exhibitors who refuse to pay, by refusing to rent films to them.
I suppose there was no other means open to them to enforce what is really a voluntary honourable bargain, but I think we are all agreed that that it is not a desirable thing to do. One would be in a very much stronger position to get a good voluntary agreement if one could go to the exhibitors and say, in effect, to them, "You have been fairly treated over this matter of tax, and, therefore, it is really up to you to play fair about the production levy."
Those of us who care so much for the production of British films feel that there is an indirect connection between the proposal we have before us tonight and the whole question of financing British film production. I would put it to the Chancellor that, after all, films are really not on the same footing as dog racing or cricket.
I believe myself that films have such an impact upon the mind and the outlook of so large a proportion of the population that they have a far greater influence upon the ideas and the ideals of the people and that we should do everything possible to foster and prosper an industry of this kind. [An HON. MEMBER: "Even of dog racing?"] I have no personal interest in dogs, and I would be prepared to tax them to the highest limit.
My heart does not warm to cricket, but I feel that where we have something which influences the ideas and the ideals of the people we should look very carefully at it and make certain we are not doing something which is likely to have a detrimental effect not merely on the exhibitors but, ultimately, on the production of British films.

7.15 p.m.

Sir David Robertson: I am sorry that the hon. Member for Flint, East (Mrs. White) does not warm to cricket. I wish she had been with me on Saturday afternoon when I drove across a substantial part of England from Sunningdale to South-East Sussex and we travelled by the by-roads. On every village green we came to there was this lovely English sight of a cricket match.

The Deputy-Chairman (Mr. Hopkin Morris): The hon. Member, I hope, will take another opportunity of dealing with that.

Sir D. Robertson: Forgive me, Mr. Hopkin Morris, but as one who was brought up to believe that cricket was one of the best games, I was bound to retaliate on the hon. Lady.
I have figures here which I think more than anything else will convince my right hon. Friend the Chancellor of the Exchequer that the cinema industry in the Highlands of Scotland, and I believe, the small cinema generally, is badly in need of assistance if it is to avoid going into the bankruptcy court. I shall not weary the Committee with many figures, but I have some here of five cinemas on the coast of the Moray Firth and one on the Atlantic coast at Pentlands. In the former case there were £13,728 in takings, £5,715 went in taxes and levy and there was a loss of £371 before charging rent or interest on capital.
The Chancellor is the senior partner in that venture, and if this state of affairs goes on he will be the biggest sufferer, but the people will suffer too, because there is no living theatre, no dogs, no cricket and no such pastimes in this part of the British Isles. The people entertain themselves mainly, and it would be a very serious matter if these cinemas had to close down, particularly for the campaign which my hon. Friend the Member for Inverness (Lord Malcolm Douglas-Hamilton) and I have been waging to prevent a further depopulation of the Highlands. The cinema is the sort of thing which induces some of the young people to stay at home rather than go to the big cities and the bright lights.
The second figure I have is of £14,000 in takings, £5,338 in taxes and levy and


a loss of £281. The other figures I have are all similar, and I shall not take up the Committee's time with them, but there can only be one end, the closing down of the cinemas, with the serious harm which that will do to the people who have no television, and for whom there is no sign of getting it soon.
A responsibility rests on the Chancellor to take into account all these factors and also the fact that there has been discrimination against this industry in respect of Entertainments Duty. The hon. Member for Cheadle (Mr. Shepherd) spoke about it being smash and grab or grab and smash. I think that during the war the money had to be got at any cost and the cinema industry, which, I believe, at that time enjoyed very great prosperity, a prosperity which we are seeing waning in recent times, was to hand for the then Chancellor to impose taxation. The sellers' market is over for the cinema, as it is over for so many other things, and that is a situation which will be accentuated as a result of competition.
The hon. Member for Orkney and Shetland (Mr. Grimond) wondered if discrimination against this industry was brought about on moral grounds. No industry has played a greater part in making us more teetotal than has the cinema industry. Not so long ago there was little for the ordinary people in many places to do other than to go to the public house. The experience of that industry has been that wherever a new cinema was opened up in the London area the takings in the public house went down. So, on moral grounds, quite a strong case can be made out for the cinema.
In conclusion, I would say that the Chancellor has been a good manager of the nation's finance, as hon. Members on all sides of the Committee will agree. Living up to the reputation which he so rightly deserves, may I ask him to cast his bread on the waters in this matter? I know that he has tremendous commitments to face, but it would be an act of good management if at this time he said, "We are just about killing the goose that lays the golden eggs." In the interests of the nation he would be performing a function well worth while by reducing this savage taxation.

Mr. John Taylor: I was impressed by the final words of the hon. Member for Caithness and Sutherland (Sir D. Robertson) and I hope that the Chancellor will be touched by what was a strong point. The hon. Gentleman put the case for the small cinemas in his own constituency, and in my constituency in the Lowlands of Scotland the position is similar. There are about 20 cinemas and every one of them serves a small town or community and in each of them there is a financial crisis.
Like other hon. Members who have spoken in this debate, I was a little suspicious last year, when we were considering on the Finance Bill a similar new Clause, of the official propaganda in favour of some tax adjustment for cinema seats. I took the trouble to go into the matter rather carefully with the late Member for Dundee, East, Mr. Tom Cook, who was particularly interested in the matter last year. I was impressed by the data he had collected about the state of the small cinemas in Scotland and since then I have taken the trouble to interview the cinema managers and owners in my own constituency. I found them co-operative in giving me details of their accounts and their financial conditions.
Like the hon. Member for Caithness and Sutherland, I shall not take up the time of the Committee with the sheaf of instances I have here, but will put the present position of a small cinema in a village. The figures I am giving are the most recent that I have been able to obtain and they are for the three weeks of last month. In the first week the gross takings were £108 10s. 4d. The tax on that sum was £26, leaving net takings of £82 10s. 4d. In the second week the gross takings were £78 10s. 5d., the tax was £17 7s. 6d. and the net takings were, therefore, £61 2s. 11d. In the third week, there was a gross of £98 14s. 6d., a tax of £23 6s. 8d. and a net of £75 7s. 10d.
The irreducible, unavoidable weekly overhead charges for this cinema are £56 plus the film percentage rents which are normally at least one-third of the net takings. These overheads are constant and recurring and include such things as staff wages, cleaning, and so on. They do not include any reward for


the owner of the cinema. It will be seen that the aggregates for those three weeks were gross takings of £285 15s. 3d., less tax of £66 14s. 2d., and net takings of £219 1s. 1d. less irreducible overheads of £168, which leaves £51 1s. 1d. Out of that the film rentals of approximately £73 have to be paid.
So the three weeks' loss of that one small village cinema is about £20. I cannot think of many other industries where tax has to be paid irrespective of a trading loss, and a fairly substantial one at that. As has been said, that state of affairs cannot go on. If, weary with this uneven battle, cinemas of this type close down, the Chancellor will get no taxes at all. Somebody has to cut the losses of the small cinemas in the small communities of this country—either the Chancellor or the industry. If the Chancellor leaves it to the industry, the Exchequer will be the greater loser because it will lose all the revenue from each cinema instead of retaining a portion of it.
It is obvious that there is no solution to this problem for the small cinema owner in an increase in the price of each seat. That is not a practical proposition for the small cinema owner. Already, in my constituency at least, instead of what the hon. Member for Cheadle (Mr. Shepherd) said about there being no aggregate reduction in the numbers of the cinema going public, the local picture-goers are spending as much as they are able to spend on this item of entertainment. The Board of Trade figures have made it clear that receipts are falling at the present time.
It must be remembered that in the small town or in the large village where there is a cinema the habit of cinema going is a family affair. It does not represent the expenditure of an individual but is an item in the family budget. It is usually a weekly visit though in some cases it is twice a week and there are some cinemas in my constituency which change their programmes three times a week. In a mining community where the geographical outlook is rather drab, where there is little to be seen on the skyline but pit bings, where there is very little colour and excitement in the lives of the inhabitants, the habit of going to the cinema is the one bright spot for the children and wives, even for

the men, in the week's programme. If the prices are increased, those visits will be decreased. Those which are biweekly will become weekly and those which are weekly will probably become fortnightly.
Apart from that factor, if a cinema in those areas increases its prices it also increases its taxation. To obtain one extra 1d. per cinema seat, many cinemas in this category would have to increase each seat price by 3d. or so, such is the craziness of the existing system of cinema taxation. So, to increase prices, would not solve the problem but would only make it more acute and more people would stay away from the cinema. Neither I nor any other hon. Member who has spoken so far in this debate can see any salvation for the small cinema other than a degree of tax remission such as is proposed in this new Clause.
7.30 p.m.
I wish to mention the special problem of the small cinema in small towns and villages where the local welfare hall is licensed to show films. Welfare halls are, quite rightly, exempt from the cinema tax. Therefore, they can charge less per seat for comparable types of film. The local cinema owner, where there is another privately-owned cinema in the same community—who has to pay the full tax—has to fix his prices in competition with the welfare hall. It is unthinkable—no one would suggest it I hope— that we should levy a tax on welfare institutions for the showing of entertainment. There is an especially strong case in communities of that kind, where there exist side by side a one-man cinema and the welfare hall showing comparable films, for special examination of the problem of some tax remission for the private owner.
Generally, the case has been fully made out that there is no real logic in the continuation of this tax. It may be that the small cinema is regarded by the Exchequer as expendable. But, if that is the conclusion reached—they are going the right way to make it expended—they will be making a very grave mistake because this is a harmless, in many ways beneficial, and potentially much more beneficial entertainment of millions of ordinary common people of our land.

Brigadier Terence Clarke: The majority of hon. Members who have spoken in this debate seem to have come from the Highlands and Islands and I wish to produce a more southern aspect by speaking of the large city, of which I represent a portion, which is very poor and has a lot of small cinemas. If the Chancellor of the Exchequer does not do something for these small cinemas they will "go broke." Whereas most of us ask the Chancellor to give back some of the money he filches from us each year, on this occasion if he does not relax and accept the proposed new Clause he will lose money by diminishing returns. In addition, he will cause unemployment.
For those reasons—both very good—I hope he will accept the new Clause, or give us some alternative. In addition, I believe that the cinema industry will feel a very much bigger draught in the next two or three years. We are going to have sponsored television, we hope. If we do, more people will stay at home watching television while fewer people go to the cinemas. That will make it even more hard for the industry, which has to make itself more attractive in order to compete. I think the Chancellor must help it in this matter.
The hon. Lady the Member for Flint, East (Mrs. White) spoke of various sports. I do not propose to get out of order by referring to them in detail but all the sports she mentioned are helped by the alcoholic business in that they can sell drinks—at the dogs, boxing and racing—and that helps those industries. I have yet to go to a cinema where one can get a drink, although I admit that many of the films one sees would drive one to drink—if one could get it. I do not for a moment suggest that drink should be sold at cinemas, but they are handicapped in this respect.
Although we cannot expect him to give way in respect of all cinema businesses, I hope that when the Chancellor replies he will agree to help the smaller cinemas in this way, or will produce some suggestion which will help them to carry on and not to "go broke."

Mr. Julian Snow: I think I have detected in most speeches this afternoon the argument that the particular duty applicable

in this case is the cause of falling attendances and financial difficulties in the industry. Although I would not like to cross swords with the hon. Member for Cheadle (Mr. Shepherd) in respect of arguments deployed here—he has great experience of this industry—nevertheless, the drop in attendances between 1948 and 1952 should not be underestimated. I believe it runs to about 168 million per year.
One should recognise that this drop is not merely because the high duty levied puts the price of seats beyond the pocket of many people, but is really because the cost of living itself has made some retrenchment in personal expenditure necessary. It is not just this duty but the whole level of taxation and the resulting cost of living which has created these tendencies. If that is a fair assumption, as I believe it is, I should have thought it the duty of the Government to consider, where there is a high level of taxation on a number of industries and a relatively low level of taxation on other industries, whether those taxed more highly should be given better consideration.
I want to draw the attention of the Financial Secretary to the situation that exists in that great conurbation of the Midlands which surrounds Birmingham. If we study the residential structure of that conurbation, we find a difference in it compared with the structure around London. People employed in Birmingham do not come in from tightly packed suburbs in the same way as people who work in central London do, but tend to live in dispersed villages and townships, and come into the suburbs of Birmingham, where the major industrial interests are found. In those smaller villages and townships are to be found the small cinemas, which are very hard hit and whose existence is threatened.
People who normally have a tiresome journey from their communities into the industrial areas of Birmingham, do not want to do that journey once again in the evening in order to go to the cinema. In any case there is a big transport problem and a personal problem of expenditure as fares are going higher and higher. Altogether there are overwhelming reasons why there should be some encouragement for people to stay in the evenings within their own local communities. I shall not pursue that matter, but it is


an important one in that the small cinema serves a definite need in keeping people in the locality once they get back from work.
I think it true to say that the small cinema is the best supporter of the independent producer in the cinema industry. I see that my hon. Friend the Member for Flint, East (Mrs. White) disagrees, but that is my impression and certainly my information. The independent producer finds it difficult to secure exhibition time with the big circuits. I am not criticising the big circuits; frequently the films produced by independent producers are not up to their estimate of what is required. Nevertheless, the small independent local cinema owner provides an important market for the independent producer and for that reason should receive some sort of assistance.
There is a technical point with which I will conclude and which I should like the Financial Secretary to consider at least departmentally. One small cinema owner tells me that there is some harshness in the collection of this duty from the small man. It is a technical matter which the hon. Gentleman might look into departmentally. I understand that the duty is collected without regard to the payment for rentals, which the industry distributor charges the small cinema exhibitor. If the payment practice to the renters could be related to the collections by the Treasury, I think some hardship might be avoided to these small people.

Lord Malcolm Douglas-Hamilton: I want to reinforce some of the remarks made by my hon. Friend the Member for Caithness and Sutherland (Sir D. Robertson). A great number of hon. Members have made a very good case for the industry and particularly for the small cinemas, but I want to draw attention to what is happening to six cinemas in the neighbourhood of Inverness, which may be the same as those which my hon. Friend mentioned. All are within the Highland area, but not in the remoter parts of the Highland area.
These six cinemas are in considerable difficulty. At the present rate of taxation, only one is making a net profit, and that net profit is less than £1,000 a year. The remaining five average a net loss of £370 a year. At the same time, these six cinemas are paying an average of £4,600 a year in Entertainments Duty. If they

paid tax at the same rate as would be paid on football or other entertainments, it would be less than half of the £4,600, so that there is quite a considerable sum to play with in making these cinemas solvent. If they have to continue to pay the present tax, there is no doubt that they will go out of business, which will be a tragedy for these remote areas.
Surely we want to try to strengthen the remote areas in this country. The Chancellor of the Exchequer has been a very good administrator and manager of the nation's affairs, but I think a great deal more has to be done for, and more consideration has to be given to, the remote areas of Britain. I believe that this is one of the fiscal measures which the Chancellor could use. It would immeasurably strengthen the remote areas. I hope he will give earnest consideration to the new Clause, and particularly to the case of the small cinemas.

7.45 p.m.

Mr. John Rankin: When we were discussing the cinema industry in Committee two years ago, the then right hon. Member for Southport, who has now been transferred to another place, used these words:
…we are dealing here with an industry that is definitely sick."—[OFFICIAL REPORT, 5th June, 1951; Vol. 488, c. 916.]
That was two years ago, and whatever differences of opinion may have been expressed within the House then as to the truth of that statement, it must now have been driven home to the Chancellor of the Exchequer that there is absolutely no difference of opinion today about its truth. He has been listening not to a party case but to a case presented by the House of Commons, and I hope very much that he will think very carefully indeed before he repudiates the case which has been so strongly made from every part of the Committee.
The hon. Member for Cheadle (Mr. Shepherd), who did not accept some of the arguments presented in support of the case, nevertheless came to the same conclusion as has been reached by every hon. Member who has spoken. He pinned the responsibility for the rescue of this industry from the sickness which pervades it on the shoulders of the Chancellor of the Exchequer. I hope the Chancellor will meet his responsibilities and will accept the case which has been presented today.
I will not elaborate the points which have been made, although I could present certain aspects from my own division, which is a purely industrial division, very closely congested, containing a number of cinemas which I should like to see more comfortable and better conditioned in every way, at least in the case of one or two of them, for the working class folk who go there—and that can be done only if the Chancellor yields to the representations which have been made to him.
But when we make these representations I think we recognise that the right hon. Gentleman has to find a vast amount of money for all sorts of important things. He must find this year £1,600 million for armaments and £1,200 million for social services. We recognise the tremendous pressure which is placed on his purse, and I am certain that the cinema industry is quite willing to assist him in finding that money. They recognise that in finding it he has to tread on people's toes, but their objection is that he is treading on only one toe, the toe of the cinema industry. The other toes, represented by dog racing, horse racing and speedway, have all been relieved of tax up to 1s.
People in the cinema industry are asking, not for that parity in taxation to which I consider they are entitled, but for partial parity. They are asking that the Chancellor return to them, this year, £2½ million in remission of tax. In a full year the cost to him would be £3,700,000. That is not a great deal, in view of the purposes fulfilled by the cinema today. It has not only a social purpose but, as was said by my hon. Friend the Member for Flint. East (Mrs. White) is aids production. No less than £3,800,000 goes in voluntary levy from the exhibitors to the productive side of this industry.
To some extent, because of the shortfall in the expectations of the operation of the Eady scheme, that £3,800,000 has become almost an additional tax. What people in the industry are asking is that the Chancellor should relieve them from the oppressive weight of that additional tax by lightening the burden imposed on them by the Exchequer. That is our demand. As I say, it is not a party demand, but a House of Commons demand, to which I hope the Chancellor,

who has not so far yielded much, will now yield with the approval of the whole Committee.

Mr. Geoffrey Hirst: I have been very impressed with the unanimity of the speeches made—with one possible exception, due to a misunderstanding of the meaning of the new Clause—and I hope that unanimity will impress itself on the mind of the Chancellor.
Like my hon. and gallant Friend the Member for Barkston Ash (Sir L. Ropner), I have spent a considerable time during the last six months investigating the problems and conditions of the film industry. I should like to congratulate the right hon. Member for Huyton (Mr. H. Wilson) on his speech. He will remember that I referred to the Entertainments Duty during the Budget debate and expressed the hope that my right hon. Friend would give it consideration. That hope was expressed, not because I feel I have any influence over the Chancellor, but because it is a question of sheer good management. No one who has taken the trouble to go into the situation, particularly with regard to the smaller cinemas, can be left with any other opinion than that unless something is done quickly to help, many of them will be forced out of business.
Businesses which are not efficient do not add to the Chancellor's grab, and unless these industries are enabled to become efficient they will not be able to contribute or to take advantage of scientific progress and changes, such as that brought about by three-dimensional films. Whether such progress is good or bad is not a matter we should discuss today, but it does involve great expense. The point has also already been made that many cinemas cannot be kept in good condition.
One of my right hon. Friends did not approve of the Clause, because he said that only the smaller and medium-sized cinemas needed help. But those are precisely the cinemas which this Clause is designed to help. Two-thirds of the reduction suggested would apply to cinemas with prices up to 1s. 6d. and 90 per cent. to those with prices up to 2s. 3d.
The hon. Member for Flint, East (Mrs. White) mentioned the tie-up between entertainment tax and production and


I beg my right hon. Friend to bear that important point in mind. It is impossible to have a healthy film industry—which has great export possibilities—unless it is based upon sound and healthy trading conditions at home. In other words, there must be sufficient cinemas available to justify the cost of film production. I have recently returned from a visit to Spain in company with the British Film Producers' Association to see what may be done there. I found that British films were popular though there were financial exchange difficulties. Export of British films provides an advantage to this country in spreading information about our way of life.
I do not see how, with all the good will in the world, the smaller cinemas can keep up their contributions to the Eady fund unless they are put in a position where they have no need to worry about whether they will be in the bankruptcy court the next day. If my right hon. Friend cannot go the whole hog today— though I see no reason why he should not—I would urge him to go some of the way and not to leave the industry empty-handed. They need help, not only on the grounds of equity and justice, but because if they do not receive it there will not be that source upon which my right hon. Friend or any other Chancellors may rely on towards meeting the various expenses confronting the country.

Mr. James Carmichael: There has not been a single speech in support of the present form of taxation on the film industry. Because of his heavy responsibilities, the Chancellor is entitled to handle the national exchequer with great care. But on the other hand, he must consider the views of the House of Commons, and for a long time I have not heard a debate where there has been such unanimity in the opposition to the present form of taxation.
I am in complete agreement with the point of view expressed in two good speeches made by my right hon. Friend the Member for Huyton (Mr. H. Wilson) who gave details of the figures associated with the industry, and my hon. Friend the Member for Nottingham, North-West (Mr. O'Brien), who spoke of the conditions of the workers in the industry.
8.0 p.m.
It would be unwise for any hon. Member to continue arguing the figures. The figures have already been given by my right hon. Friend the Member for Huyton (Mr. H. Wilson) in addition, the Chancellor himself knows from the evidence supplied by the industry what the figures are. No figures have been quoted today which can be repudiated. Indeed, the Chancellor is probably more conversant with the figures and the difficulties of the industry than anyone else. The wages in the industry average £6. I ask any hon. Member to get people to work in an industry with a feeling of contentment on a wage of that kind. Therefore, one of the first things to be done in the industry is to improve the conditions of the workers.
The other point which has already been mentioned is the renovation of the halls. It cannot be done on the present money going into the cinemas in working class areas. I represent a very congested area in the City of Glasgow. There are six cinemas in that constituency alone, and the prices are all below 2s. [Interruption.] I wish the Financial Secretary would speak a little more softly. If he wants to interrupt me I will have the greatest of pleasure in resuming my seat for the time being. I want to stress that the real form of entertainment in my constituency is the cinema and, as I have already said, there are six not one of which charges more than 2s. They have to change the programme twice a week and it is quite impossible on their returns to recondition the cinemas and make them comfortable for their audiences.
I regard the cinema as one of the most important social forces in the country. Some mention has been made of dog racing. I only went to a dog racing track on one occasion. I was there for three hours, and those three hours were wasted so far as I was concerned. I am a cinema fan to some extent, and therefore, I say to the Chancellor that his first obligation is to have regard to the conditions of the workers in that industry and to the improvement of the halls.
I remember that in former debates the suggestion has been made that if a reduction were made in the tax there might be a reduction in the prices of the seats. We are getting to the stage now where


it would be false for the cinema owners to suggest, in order to get a reduction in the tax, that they would make an immediate reduction in the prices. They could not do it because the whole industry is in a very bad state.
The Chancellor will have seen from the figures which have been submitted to him today that he is at the stage of diminishing returns. He will estimate for a certain figure coming in from the cinemas, and I am certain that the returns from the rural and industrial areas, some of which I represent, will be less than he expects. I beg the Chancellor, if he is unable to accept this new Clause now, to give it very serious consideration so that, on Report, he might create an improvement in the present position.
If he cannot deal with the tax in the way proposed in this new Clause, I ask him at least to treat the industry in the same manner as he has considered football and other forms of sport and consider the possibility of reducing the tax on seats up to 1s. If that were done it would be a step in the right direction. I hope that he will not stonewall everything that has been said today and refuse to make any contribution to the industry. I hope, on the other hand, that his study of the proposition will enable him to consider it sympathetically.

Mr. Beveriey Baxter: I apologise for not having heard all the debate, although I think I know more or less well the arguments that have been made. These are days when showing people around the House of Commons has become almost the first occupation of Members of Parliament.

Mr. Richard Adams: There should be Entertainments Duty on that.

Mr. Baxter: The Chancellor of the Exchequer has always been responsive to anything connected with the arts, and the films must be included. As has been said several times today, this is a very sick industry. I do not want to go over the arguments about television, and so on, but the film industry is in the shadows, especially in the smaller districts of which the hon. Member for Bridgeton (Mr. Carmichael) was speaking.
I know that if the Chancellor were to grant a concession he would have to find the money somewhere else. It is not a very large amount. I am not sure whether I would be in order in suggesting to the Chancellor where he can find some money, but he could do it in the realm of art or self-expression. I think that if he did away with this very foolish nonprofit arrangement in the theatres, that would make some contribution to the amount necessary. I wonder whether the Committee realise that the company showing "A Streetcar Named Desire" not only pays no Profits Tax and no Income Tax but does not give the public the benefit of the Entertainments Duty, which it takes itself. It never reaches the Chancellor. The price is not reduced for the customer.
I do not want to be controversial, because it is not in my nature, but I am not certain that the Chancellor's investment in "Gloriana" at Covent Garden, which, I was told, had cost £20,000, might not have been better used to save some of the cinema people. I am sure that anybody who heard the opera would have been very glad to go to a cinema.

Mr. O'Brien: It is not as bad as all that.

Mr. Baxter: The Chancellor was there, so he knows what I am talking about.
Any concession at this moment, however small, would put life, hope and confidence into this industry. People do not like going to an empty cinema. It is like an empty restaurant; people will stay away from it. Once people get the idea that the cinema is a dying entertainment, then its death will come much quicker than it would have done otherwise. I hope that the Chancellor will throw out a little hope, even if it means that we will have to go and hear "Aida" or even "Madam Butterfly" instead of Mr. Benjamin Britten's works.

Mr. F. Blackburn: I think that the Chancellor must have been impressed by the unanimity of the Committee today. In fact, there has only been one dissentient voice—the right hon. Member for Torquay (Mr. C. Williams)—and I was not quite sure whether his objection was to my right hon. Friend the Member for Huyton (Mr. H. Wilson) or to the new Clause, but it


became apparent later that his objection arose from his misunderstanding of what the new Clause was for. Therefore, I hope that the weight of opinion on both sides of the Committee will have some influence on the Chancellor.
Three important questions have emerged from the debate. First, can a sound case be made out for some relief for the cinema industry? I do not think there is any doubt that the answer to that question is, yes. Second, is the burden of taxation that cinemas are carrying unfair compared with other forms of entertainment? Again, I think the answer is undoubtedly, yes. Third, if some relief is to be given, is this Clause fair and reasonable, and does it distribute the benefits where they are most needed? I think that everyone will agree that the answer to that question also must be, yes.
The statement has been made that last year the Chancellor was not quite aware what the views of the industry were. I do not think he can claim that this year, because my right hon. Friend the Member for Huyton referred to the Report which was submitted to him by the Cinematograph Exhibitors' Association of Great Britain—a Report which had been prepared by the accountants of the Association. If the Chancellor accepts the figures of that Report, he must also accept the view that something must be done for the industry, as the industry is in great need of help. Whether my way of relief of taxation or by some other method, it is certain that something must be done.
Some time ago, I met a deputation of proprietors of small cinemas, who put their case to me. After we had been talking for some time, I interrupted and said, "It is not helping your case when you overstate it. If what you tell me is true, you are merely existing on the sale of ice cream," and they said that that was exactly what had happened. I know that my right hon. Friend does not sec anything wrong in a cinema existing on the sale of ice cream, but I think it is a rather doubtful commodity on which to make the safety of that industry depend. If we read the Report which was submitted to the Chancellor, we shall see that the point was brought out that they do exist on the sale of ice cream.
My right hon. Friend quoted certain figures from the Report, and I should like to refer briefly to two of them, but on a

different basis. On the basis of the figures submitted in the Report, if we assume that every exhibitor of the 4,570 cinemas covered by the Association was the owner, the average surplus available for each owner-exihibitor would be £1,355, always assuming that my arithmetic is correct. Out of that sum, they have to meet directors' fees, reserves, dividends and taxation. If we also assume that every exihibitor was the lessee, the average deficiency of each lessee-exhibitor would be £308, to which we have to add directors' fees and reserves. We do not know exactly what proportion are owner-exhibitors and what proportion are lessee-exhibitors, but the true position must be between the two figures I have given.
Again, if we look at the figures from another angle, the average cinema with less than 1,500 seats is making a loss on film exhibition, and is recouping its position on the sale of ice cream. The stress this afternoon has been on the help needed for the small cinema, and reference has been made to small cinemas in rural areas. I hope the Chancellor will not tell us that there is provision for exemption from taxation for cinemas in rural areas because of a concession made in the Finance Act, 1948. That concession does not always work as it was intended to work.
8.15 p.m.
I have in my own constituency a cinema which meets the requirement of having less than 400 seats, and it is a cinema in a village. Unfortunately, the village is one of three such villages which together form an urban district. When we add together the population of the three villages, the total comes to over 4,000, and, consequently, the cinema does not get the benefit of the concession which was given by the Finance Act, 1948.
A point has been made about attempting to bring about increased admissions. We all know that admissions are decreasing, and I think that this point has been sufficiently stressed by other hon. Members, and I shall not, therefore, go any further into it. I have set out the three questions to which I think affirmative answers must clearly be given, and I sincerely hope that the Chancellor will remember that these requests and suggestions have been made to him not from this side of the Committee only, but that


almost every speaker from his own side has also laid stress on the need for some help to be given to the industry. I hope he will be able to have the pleasure this evening of making some concession to it.

Mr. R. A. Butler: We have debated this matter for three hours, and if we go on at this pace there is no alternative to having to sit late for two nights, because we have an undertaking from the right hon. Gentleman opposite that the Bill will be finished in two days, and this is only the first of the new Clauses. However, I do not take an altogether despairing view, because we expected that many hon. Members would speak on this subject, which is one of the most important, and it is, therefore, quite right that we should have a reasonable debate.
I do not think it would be unreasonable to come to a decision as soon as we can now, because, otherwise, we shall be in the position of being very much delayed. As we are trying to carry this Finance Bill without the use of the Closure, the only way to do that is by common consent, so we should maintain that principle and try to use it.
The first speech on this subject was made by the right hon. Gentleman the Member for Huyton (Mr. H. Wilson), who made one or two points with which I will deal immediately. He said that the trade had offered discussion. I can assure him that they not only offered discussion, but have been engaged in discussions with my hon. Friend the Financial Secretary, and I can conscientiously say that any line that has been taken by the Government has been taken after considering the views of all sections—the exhibitors, the producers, the renters and every section of the industry. It will not be the fault of the industry or of hon. and right hon. Gentlemen on the other side of the Committee if the case has, in any way, been misunderstood. I assure them that it is fully understood.
The second point that I should like to make is this. It is not remarkable that there should be unanimity in desiring a reduction of taxation. The tax collector, and particularly, the Chancellor of the Exchequer, very often stands in an isolated position, and is none the worse for that. There are a great many hon. and right hon. Gentlemen who are

interested in this industry in one way or another, or represent constituency cinemas, and we are not surprised that there is unanimity on the view that taxation is too high.
The right hon. Gentleman raised the question of the Board of Trade figures. The position about that is a rather human one. It is quite true that the right hon. Gentleman himself encouraged the collection of statistics, but, in fact, it is the exhibitors who have found that the form-filling involved in the compilation of these figures is even more tedious than the officials of the Board of Trade themselves, and the result is, that the Board of Trade have tried to keep the collection of figures to a minimum.
Figures were last collected for September, 1951, and another series is now being collected, despite the human objections of the exhibitors, but they will not be ready for some time. I think that all sides of the industry, including the exhibitors, are really desirous of seeing that the information made available by the initiative of the right hon. Gentleman is continued.
The right hon. Gentleman next raised the question of the Cinematograph Films Council, and said that their views were unanimous. I do not think he quite did justice to the facts, because it is a fact that Mr. G. H. Elvin, the General Secretary of the Association of Cinematograph and Allied Technicians, himself claimed that there was no justification for tax reductions to benefit cinema proprietors, to which he said he was firmly opposed. His view was that any relief which accrued should benefit the producers, the employees and the public.

Mr. H. Wilson: I was, of course, aware of the views of Mr. George Elvin, with whom I have had very many dealings over the past few years, and I had him in mind when I chose my words rather carefully and said that it was passed without any contrary vote. I was not present, of course, but I understood that Mr. Elvin reserved his position. He did not, in fact, vote against the resolution.

Mr. Butler: May such a happy fate attend all measures of Government policy. I was only intervening in the interests of accuracy, because the right hon. Gentleman, himself a scholar, would not wish to offend in any way.
We had some other interesting speeches from the hon. Member for Woodside (Mr. W. G. Bennett) who referred, in particular, to the small cinemas—he has a particular knowledge of those in Scotland— with which the right hon. Gentleman who is to follow me will no doubt deal. I think that he, perhaps, over-estimated the needs of the small cinemas, because if we look at the accountants' figures to which the right hon. Gentleman made reference we find that it is not proved that the small cinemas are really suffering more than the medium-sized cinemas. Although there is obviously a case for the small cinemas—and here I refer to the speech of my right hon. Friend the Member for Torquay (Mr. C. Williams)— the trouble in the cinema world is not confined to the small cinemas.
The hon. Member for Nottingham, North-West (Mr. O'Brien), who probably knows as much about this subject as anybody in the Committee, referred to the low wages paid in the industry. The Government are well aware of that. If I may say so, the hon. Member put his case in a very reasonable and sensible way. My hon. and gallant Friend the Member for Barkston Ash (Sir L. Ropner), together with my hon. Friend the Member for Cheadle (Mr. Shepherd), referred to the fact that 40 per cent. of the takings of the cinema industry were seized by the Exchequer, and that, therefore, the industry was treated more hardly than any other industry. I would remind the hon. and gallant Member for Barkston Ash and the hon. Member for Cheadle, and others who raised this point, that in so far as the Exchequer preys on an industry it does not prey on this industry any worse than on some others.
Take the case of beer. Taking the average price of a pint at 1s. 4d., the average duty is 8½d. Therefore, in relationship to price, the duty is 53 per cent. —appreciably higher than in the cinema industry. Take tobacco. The price of a packet of cigarettes is 3s. 7d., and the public may like to know that the duty is 2s. 9d.—a percentage of duty to price of 77 per cent. Take the case of matches. The average price of a box of matches may be taken as 2d. The duty is l·1d., an average extortion of 55 per cent. Take the case of petrol. The average cost is 4s. 6d. a gallon and the duty is

2s. 6d., which bears a proportion of 55 per cent.
When we come to cinemas, the total receipts referred to by right hon. and hon. Members in the course of the debate amounts to £103,250,000 and the total Entertainments Duty to £37,250,000, which represents 36 per cent., compared with all these other duties to which we have just listened. Therefore, the case made by hon. Members in the course of the debate that cinemas are treated more hardly than other industries in the respective duties levied on them—although I confess at once that the duty is heavy in relation to the needs of the industry— cannot be sustained.
People think that the competition of television is unfair, but in the 1951 Budget the Purchase Tax on television sets, for planning reasons, of which we hear so much, was raised to 66⅔ per cent. and is now 50 per cent., so that even that form of competition has a higher levy upon it in the shape of tax on the set than is levied on the cinema industry.

Mr. H. Wilson: Would the right hon. Gentleman suggest that in the case of the television set the actual percentage of the price paid by the consumer is higher than the percentage in the case of the cinema?

Mr. Butler: No. The intellect of the right hon. Gentleman remains pure and firm even at this late hour, and the cases are not, to quote a Latin tag, in pari materia. They are not the same. I only quote it to show that the set itself is taxed to that extent.
So much for some of the points which have been raised. I now turn to the general arguments raised during the course of this debate. No hon. Member, I think, has mentioned the fact that very considerable concessions were made by the Government last year. Last year, we reviewed the effect of the duty on the industry on the Report stage of the Bill, and there were two main purposes in the changes we then made.
First, we introduced a new scale which gave much greater flexibility and freedom to the exhibitors to adjust their prices. Secondly, we reduced by a halfpenny the duty on the 9d. and l0d. seats at a cost to the Exchequer of about


£150,000 to £200,000 a year. This is the answer to the hon. Member for Bridgeton (Mr. Carmichael), to the hon. Member for Woodside and to other hon. Members who referred to the cheaper seats. The one tribute which I think I can pay to this new Clause is that it makes an attempt, as stated by the right hon. Gentleman, to deal with the cheaper seats first.

Mr. McNeil: The right hon. Gentleman says that in the current year the concession of a halfpenny on the 9d. and l0d. seats cost the Exchequer £150,000 to £200,000. I suppose the right hon. Gentleman would want to make a calculation in relation to the other seats affected by that change, and perhaps he would tell us what was the effect on the Treasury.

Mr. Butler: I am giving the general level of the concession, and I am afraid I cannot add to that. It is a combination of the amount given. I have also referred to the flexibility of the scale.
The hon. Member for Nottingham, North-West then raised the question of the general position of the industry, and here I must remind the Committee that the state of the industry is not governed solely by the tax or duty levied upon it. When we discussed the cotton industry, hon. Members were very apt to say that all the troubles of the industry came from Purchase Tax. When we discuss the cinema industry hon. Members are very apt to say that the whole trouble of the industry comes from the Entertainments Duty.
That is not the case. The industry would be in difficulty whether we had a duty upon it or not, and I would remind hon. Members that under the quota system, the National Film Finance Corporation or the Eady levy, and in other less important ways, the Board of Trade and the Government do their best to pay attention to the needs and wishes of the industry. I cannot, in this debate, enter into the further references which one or two hon. Members have made to the Board of Trade. I am confining myself solely to the duty, and I do not believe, although it weighs heavily on the industry, that it is the major or sole cause of the difficulty in which the industry finds itself today.
I have had put before me the question of attendances. I do not believe that the attendances could reach the very high level which they reached in 1946— 60 per cent. above pre-war—but it is a fact that attendances today, though not at the high level of pre-war, have got back to within 20 per cent. of that level. The number of attendances in 1952, which stood at 1,310 million, was still about one-third higher than before the war although about 20 per cent. below 1946.
8.30 p.m.
Further, we are, according to U.N.E.S.C.O., the country who attend cinemas the most, the yearly attendances per head of the population in the United Kingdom being 28, and the nearest being 23 in the United States, 19 in New Zealand, 17 in Canada and Australia and 14 in Italy and Belgium. That will show that although attendances are down they are still up on pre-war and that, as a nation, we still have the highest attendance per head. So much for some of the arguments used.
I am quite ready to accept that in some respects the industry is having a difficult time. The truest remark made was by the hon. Member for Orkney and Shetland (Mr. Grimond), who said that the industry was wrongly represented in the public mind as a luxury industry owing to the extraordinary night parties, furs, and other agreeable objects which, normally, I desire to tax. They give the false impression of luxury in the public mind, and everybody imagines that those who work in it and those who exhibit and rent the films are plutocrats of a high order. The industry, as all who have been in negotiation with it, know, has a difficult time.
While the latest Revenue returns, for example, at the beginning of the current quarter, show a slight improvement, some of the latest figures are not so satisfactory. The position for the Entertainment Duty figures, which worked out about the same for April, 1953, as for April, 1952, are not as good in May, 1953, as they were in May 1952. I am giving the Committee all the information at my disposal so as to show that I recognise the difficulties of the industry. It would be possible for me to make a case saying, "All is going very well," but the very latest returns show me that the


returns are not quite so good. Unfortunately, I am not in a position to offer to the Committee that I can accept the proposed new Clause, which would amount to a concession of about £3·7 million, as is known.
My hon. Friend the Member for Caithness and Sutherland (Sir D. Robertson), who has taken a considerable interest in this matter, asked me to be generous and to throw my bread upon the waters. I am not satisfied that I can go any further in this year's Finance Bill, but I will go as far as to say this about the future: I have only got the trend of this last month, May, which causes me a certain amount of anxiety. I have listened most carefully to what hon. Members have said. Therefore, I undertake to watch the trend in the next few months as carefully as I can. If this trend should continue, I undertake that the cinema's claim for relief will stand high among the competitive claims on a future occasion.
I had better not make any further statement to supplement that, because I do not want to raise false hopes. I shall watch carefully the effect on the small cinemas, but I want them to realise the change which we attempted to make last year. I undertake to regard this debate and the serious contribution made by hon. Members as something which needs watching by the Government and by the Customs, and which will have my personal attention in the months to come.

Mr. McNeil: The Chancellor will not be surprised if I say that his reply, and indeed his arguments, are exceedingly disappointing. It must be quite plain to the Committee that the Chancellor of the Exchequer is relying not upon his arguments but upon the efficiency of his Whips' Department.

Mr. R. A. Butler: Mr. R. A. Butler indicated assent.

Mr. McNeil: I am so glad I have got that admission from the Chancellor. It seems to me the only one we shall get this evening. There were only three points which the Chancellor dealt with. He pointed out that last year on the Report stage he gave a concession by remitting ½d. in tax upon the 9d. seat and a similar amount on the l0d. seat. I admit that the revised scales were a great convenience to the industry and to the

public. The concession cost the Chancellor, as he has told us, £200,000, but he was being a little naive—not to put it otherwise—when he replied to my question saying that there was no compensation. Perhaps he did not quite say that. He said that he was unaware of the compensation.
I would put to him one result of that change, which was foreseen at the time, as my right hon. Friend reminded the Financial Secretary. At the same time I added my plea. What happened, as the figures plainly show, was that as a result of that change and the consequent change up to 1s., the 1s. 3d. admission disappeared almost completely and was replaced by the 1s. 6d. admission. The Exchequer thereby took an additional l½d. per admission for the number of changes made in that respect. I cannot offer the exact figures but I am inclined to think that the Exchequer made an additional £325,000 by that change. At any rate, it was plain to the Committee that the relief in relation to the 9d. and l0d. seats in the year ended April this year cost the Exchequer precisely nothing.
Let us look at the offer made by the Chancellor when he says that he is impressed by the debate and that he will watch the tendencies carefully. He refers to the figures of April and May this year. It will have occurred to the Committee that, unhappily, April of this year could not have been taken as a very typical April. We are used by adage to the quotation about April showers, but the April showers of this year were unremitting and the figures for cinema admissions were not typical. I do not think that the Chancellor would argue that they were.

Mr. Shepherd: Is the right hon. Gentleman saying that they were higher or lower as the result of April showers?

Mr. McNeil: I think that the hon. Member is familiar enough with this industry to know that when we have a wet holiday at Easter there is compensation to the cinema industry.

Mr. Shepherd: It depends on how wet.

Mr. McNeil: If the increase in the number of seats taken varied directly with the increase in rainfall then the receipts this April must have been very high.

Mr. Ellis Smith: Manchester.

Mr. McNeil: The Chancellor now tells us that he is impressed by the May figures, but the figures for November, December, January, February, March and April of 1951–52 show unhappily a steady downward tendency in this industry. As my right hon. Friend the Member for Huyton (Mr. H. Wilson) reminded us, and the Chancellor did not contradict him, they show a reduction of between 7 per cent. and 8 per cent.
I must say that the submission of the hon. Member for Cheadle (Mr. Shepherd) greatly surprised me. The Chancellor seemed to have only two supporters. One was the right hon. Member for Torquay (Mr. C. Williams) and it transpired as his argument developed that he supported the Chancellor because he did not understand the new Clause. The other was the hon. Member for Cheadle, who supported the Chancellor in part, I think, because he did not understand his own figures. The figures of admissions from 1948 onwards show a steady and unhappy change downward.

Mr. Shepherd: There is probably some misunderstanding of what I said. I said not that the attendances were up but that the takings were, and it is true that the takings in 1952 were higher than they were in 1951.

Mr. McNeil: It would have been a miracle if it had not been so because taxation had gone up in that year and the prices consequently had been adjusted. If he quotes gross takings, the hon. Member, who knows this industry much better than I do, cannot contend that that was anything but consequent on the movement in prices.
The figure upon which we must base our judgment is that for the number of admissions, and the figures published by the Board of Trade show a steady reduction from 1948 onwards. I shall quote them very briefly. In 1948, the figure was 1,480 million; in 1950 it was 1,396 million; in 1951 it was 1,365 million and in 1952 it was 1,312 million. In the light of those figures, for the Chancellor to assure us that he will pay attention to the trend from May onwards is to assure a substantial number of people in this industry that he will take care to give

them elaborate headstones on their graves next year.
The startling feature of this debate is that the figures relating to the profitability of this industry are available. They are supplied by a reputable firm of accountants The Chancellor of the Exchequer and his hon. Friends have displayed the utmost courtesy to the industry and to hon. Members interested in the industry, but although, by my reckoning, since the spring of this year these figures have been available for discussion on at least five occasions, not once has the right hon. Gentleman, his hon. Friends or, as far as I know, any of his officials, challenged or questioned those figures and the estimates in any way.
Moreover, as the discussion has shown, we are concerned not only with the effect of the continuation of this position on the exhibiting side alone; we are discussing it in relation to British production. One hon. Member opposite pointed to the effect that the reduction in the number of cinemas would have in relation to the cost of producing British films. My hon. Friend the Member for Flint, East (Mrs. White) referred to the Eady levy, as did my right hon. Friend the Member for Huyton. In reply to a Question on 10th March the President of the Board of Trade referred to the hope of the Government that this voluntary agreement would not only be continued but would be extended for three years, and he went on to say that if this was not secured by voluntary agreement the Government would seek statutory authority.
The existing agreement runs out in August of next year. Although I am not acquainted with the production side of the industry I understand from the speeches made by people in the industry that planning for production that is going to start in August or September, 1954, must begin six, nine or 12 months before. The Committee must understand that agreement upon the levy must therefore be secured in the reasonably near future, by which I mean a matter of months, if British film production is to continue at the existing level.
If some of these exhibitors are being forced out of business, and if one group are being forced to the point where they must choose between paying their banker or paying the levy, my conclusion must


be that they will not pay the levy, and no legislation or authority can make any difference to the arithmetic of that position. Everyone in this Committee knows that when we talk of British film production we are concerned not only with the men and women who make their livelihood from the industry, but with a vital British industry, which is sometimes dollar-earning and may be dollar-saving, and upon which British prestige and the British point of view in some degree depend.
8.45 p.m.
Tonight we have listened to the Chancellor telling us with great suavity and politeness that he cannot in the meantime do anything for either of these sectors of British industry. If this had been a Chancellor telling us at the beginning of the debate he could not assist a most deserving case in any sector of British industry we could have understood, even if we had not liked, his argument; but this is not such a Chancellor. This is a Chancellor who, from the moment he opened his Budget, has shown, for reasons not clear to us, that he is compelled to give away money in substantial sums, £45 million, £50 million, to British industry in general in the remission of taxation without qualification, without criticism, without any assessment of need for relief or relation to British production as a whole.

It is a very unhappy position, and I would say that my right hon. and hon. Friends cannot accept it.

The Chancellor seemed pleased with his reference to the taxes he obtains from other sectors of British industry—from liquor, from tobacco, from matches. I take it he was not telling the British cinema industry that the only way to save their necks was to organise themselves in a fashion comparable to the match cartel of this country; but he had no other cheer to give them. It was a poor argument. To say that the Chancellor takes more from others is an argument that certainly will not appeal to a man showing minus quantities in his weekly and monthly business.

The facts are there. Outside bodies such as the Cinematograph Council have passed resolutions asking for provisions comparable with those asked for in this new Clause. In this new Clause we have offered a solution, moderate, reasonable and practicable, to meet the needs, and only the immediate needs, of the industry, and if the Chancellor can say no more to us than he has said already, I must ask my hon. Friends to divide.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 195; Noes, 218.

Division No. 196.]
AYES
[8.50 p.m.


Acland, Sir Richard
Davies, Ernest (Enfield, E.)
Hastings, S.


Adams, Richard
Davies, Stephen (Merthyr)
Hayman, F. H.


Allen, Scholefield (Crewe)
Deer, G.
Henderson, Rt. Hon. A. (Rowley Regis)


Anderson, Frank (Whitehaven)
Dodds, N. N.
Hewitson, Capt. M.


Awbery, S. S.
Ede, Rt. Hon. J. C.
Hobson, C. R.


Bacon, Miss Alice
Edelman, M.
Holman, P.


Bartley, P.
Edwards, Rt. Hon. John (Brighouse)
Holmes, Horace (Hermworth)


Benn, Hon. Wedgwood
Edwards, W. J. (Stepney).
Holt, A. F.


Beswick, F.
Evans, Albert (Islington, S. W.)
Houghton, Douglas


Bevan, Rt. Hon. A. (Ebbw Vale)
Evans, Edward (Lowestoft)
Hudson, James (Eating, N.)


Bing, G. H. C.
Evans, Stanley (Wadnesbury)
Hughes, Cledwyn (Anglesey)


Blackburn, F.
Fernyhough, E.
Hynd, H. (Accrington)


Blenkinsop, A.
Fienburgh, W.
Irvine, A. J. (Edge Hill)


Blyton, W. R.
Finch, H. J.
Irving, W. J. (Wood Green)


Bowles, F. G.
Fletcher, Eric (Islington, E.)
Isaacs, Rt. Hon. G. A.


Brockway, A. F.
Follick, M.
Janner, B.


Brook, Dryden (Halifax)
Fraser, Thomas (Hamilton)
Jay, Rt. Hon. D. P. T.


Broughton, Dr. A. D. D.
Freeman, John (Watford)
Jeger, George (Goole)


Brown, Thomas (Ince)
Gibson, C. W.
Jeger, Dr. Santo (St. Pancras, S.)


Burke, W. A.
Glanville, James
Jenkins, R. H. (Stechford)


Burton, Miss F. E.
Gordon-Walker, Rt. Hon. P. C.
Johnson, James (Rugby)


Callaghan, L. J.
Greenwood, Anthony (Rossendale)
Jones, David (Hartlepool)


Castle, Mrs. B. A.
Grenfell, Rt. Hon. D. R.
Jones, T. W. (Merioneth)


Champion, A. J.
Griffiths, David (Rother Valley)
Key, Rt. Hon. C. W.


Coldrick, W.
Griffiths, Rt. Hon. James (Llanelly)
King, Dr. H. W.


Collick, P. H.
Grimond, J.
Kinlay, J.


Corbet, Mrs. Freda
Hale, Leslie
Lee, Frederick (Newton)


Cove, W. G.
Hall, Rt. Hon. Glenvil (Colne Valley)
Lee, Miss Jennie (Cannock)


Craddock, George (Bradford, S.)
Hall, John T. (Gateshead, W.)
Lever, Leslie (Ardwick)


Crossman, R. H. S.
Hamilton, W. W.
Lipton, Lt.-Col. M.


Dairies, P.
Hannan, W.
MacColl, J. E.


Dalton, Rt. Hon. H.
Hargreaves, A.
McKay, John (Wallsend)


Darling, George (Hillsborough)
Harrison, J. (Nottingham, E.)
McLeavy, F.




McNeill, Rt. Hon. H.
Price, Philips (Gloucestershire, W.)
Thomas, David (Aberdare)


MacPherson, Malcolm (Stirling)
Proctor, W. T.
Thomas, Ivor Owen (Wrekin)


Mainwaring, W. H.
Pursey, Cmdr. H.
Thomson, George (Dundee, E.)


Mallalieu, E. L. (Brigg)
Reid, Thomas (Swindon)
Tomney, F.


Mason, Roy 
Reid, William (Camlachie)
Ungoed-Thomas, Sir Lynn


Mayhew, C. P.
Rhodes, H.
Usborne, H. C.


Messer, Sir F.
Richards, R.
Viant, S. P.


Mitchison, G. R.
Roberts, Albert (Normanton)
Webb, Rt. Hon. M. (Bradford, C.)


Moody, A. S.
Roberts, Goronwy (Caernarvon)
Weitzman, D.


Morgan, Dr. H. B. W.
Robinson, Kenneth (St. Pancras, N.)
Wells, Percy (Faversham)


Morley, R.
Rogers, George (Kensington, N.)
Wells, William (Walsall)


Morris, Percy (Swansea, W.)
Royle, C.
West, D. G.


Morrison, Rt. Hon. H. (Lewisham, S.)
Shackleton, E. A. A.
Wheeldon, W. E.


Mort, D. L.
Shinwell, Rt. Hon. E.
White, Mrs. Eirene (E. Flint)


Moyle, A.
Short, E. W.
White, Henry (Derbyshire, N.E.)


Mulley, F. W.
Silverman, Sydney (Nelson)
Whiteley, Rt. Hon. W.


Murray, J. D.
Simmons, C. J. (Brierley Hill)
Wilcock, Group Capt. C. A. B.


Neal, Harold (Bolsover)
Skeffington, A. M.
Wilkins, W. A.


Noel-Baker, Rt. Hon. P. J.
Slater, J. (Durham, Sedgefield)
Willey, F. T.


Oldfield, W. H.
Smith, Ellis (Stoke, S.)
Williams, David (Neath)


Oliver, G. H.
Smith, Norman (Nottingham, S.)
Williams, Rev. Llywelyn (Abertillery)


Orbach, M.
Snow, J. W.
Williams, Ronald (Wigan)


Padley, W. E.
Sorensen, R. W.
Williams, W. R. (Droylsden)


Paget, R. T.
Soskice, Rt. Hon. Sir Frank
Williams, W. T. (Hammersmith, S.)


Paling, Rt. Hon. W. (Dearne Valley)
Sparks, J. A.
Wilson, Rt. Hon. Harold (Huylon)


Paling, Will T. (Dewsbury)
Stewart, Michael (Fulham, E.)
Winterbottom, Ian (Nottingham, C.)


Palmer, A. M. F.
Strachey, Rt. Hon. J.
Winterbottom, Richard (Brightside)


Panned, Charles
Stross, Dr. Barnett
Wyatt, W. L.


Parker, L.
Swingler, S. T.
Yates, V. F.


Paten, J.
Sylvester, G. O.
Younger, Rt. Hon. K.


Peart, T. F.
Taylor, Bernard (Mansfield)



Popplewell, E.
Taylor, John (West Lothian)
TELLERS FOR THE AYES:


Price, Joseph T. (Westhoughton)
Taylor, Rt. Hon. Robert (Morpeth)
Mr. Pearson and Mr. Arthur Allen.




NOES


Aitken, W. T.
Dodds-Parker, A. O.
Keeling, Sir Edward


Allan, R A. (Paddington, S.)
Donner, Sir P. W.
Kerr, H. W.


Alport C. J. M.
Drayson, G. B.
Lambert, Hon. G.


Amory, Heathcoat (Tiverton)
Fell, A.
Lancaster, Col. C. G.


Arbuthnot, John
Finlay, Graeme
Law, Rt. Hen. R. K.


Ashton, H. (Chelmsford)
Fisher, Nigel
Leather, E. H. C.


Assheton, Rt. Hon. R. (Blackburn, W.)
Fleelwood-Hesketh, R. F.
Legge-Bourke, Maj. E. A. H.


Baker, P. A. D.
Fletcher-Cooke, C.
Legh, Hon. Peter (Petersfield)


Baldock, Lt.-Cmdr. J. M.
Ford, Mrs. Patricia
Linstead, Sir H. N.


Baldwin, A. E.
Fort, R.
Lloyd, Rt. Hon. Selwyn (Wirral)


Banks, Col. C.
Foster, John
Lockwood, Lt.-Col. J. C.


Barber, Anthony
Fraser, Hon. Hugh (Stone)
Low, A. R. W.


Baxter, A. B.
Fyfe, Rt. Hon. Sir David Maxwell
Lucas, Sir Jocelyn (Portsmouth, S.)


Beach, Maj. Hicks
Garner-Evans, E. H.
Lucas, P. B. (Brentford)


Bell, Philip (Bolton, E.)
George, Rt. Hon. Maj. G. Lloyd
Lucas-Tooth, Sir Hugh


Bennett, F. M. (Reading, N.)
Gough, C. F. H.
McAdden, S. J.


Bevins, J. R. (Texteth)
Gower, H. R.
McCorquodale, Rt. Hon. M. S.


Birch, Nigel
Graham, Sir Fergus
Macdonald, Sir Peter


Bishop, F. P.
Gridley, Sir Arnold
Mackeson, Brig. H. R.


Black, C. W.
Grimston, Hon. John (St. Albans)
McKibbin, A. J.


Boyd-Carpenter, J. A.
Grimston, Sir Robert (Westbury)
Mackie, J. H. (Galloway)


Boyle, Sir Edward
Hall, John (Wycombe)
Maclean, Fitzroy


Braine, B. R.
Harris, Frederic (Croydon, N.)
Macleod, Rt. Hon. lain (Enfield, W.)


Braithwaite, Sir Albert (Harrow, W.)
Harrison, Col. J. H. (Eye)
Macpherson, Niell (Dumfries)


Braithwaite, Lt.-Cdr. G. (Bristol, N.W.)
Harvey, Air Cdre. A. V. (Macolesfield)
Maitland, Comdr. J. F. W, (Horncastle)


Brooke, Henry (Hampstead)
Harvey, Ian (Harrow, E.)
Manningham-Buller, Sir R. E.


Buchan-Hepburn, Rt. Hon. P. G. T.
Harvie-Walt, Sir George
Markham, Major Sir S. F.


Bullard, D. G.
Hay, John
Marples, A. E.


Bullus, Wing Commander E. E.
Head, Rt. Hon. A. H.
Maude, Angus


Burden, F. F. A.
Heald, Sir Lionel
Maudling, R.


Butcher, Sir Herbert
Heath, Edward
Maydon, Lt.-Comdr. S. L. G.


Butler, Rt. Hon. R. A. (Saffron Walden)
Higgs, J. M. C.
Medlicott, Brig. F.


Campbell, Sir David
Hinchingbrooke, Viscount
Mellor, Sir John


Cary, Sir Robert
Hint, Geoffrey
Molsan, A. H. E.


Channon, H.
Holland-Martin, C. J.
Moore, Lt.-Col. Sir Thomas


Clarke, Col. Ralph (East Grinstead)
Holmes, Sir Stanley (Harwich)
Mott-Radclyffe, C. E.


Clarke, Brig. Terence (Portsmouth, W.)
Hopkinson, Rt. Hon. Henry
Nabarro, G. D. N.


Cole, Norman
Hornsby-Smith, Miss M. P.
Nicholls, Harmar


Conant, Maj. R. J. E.
Horobin, I. M.
Nicholson, Godfrey (Famham)


Cooper-Key, E. M.
Howard, Gerald (Cambridgeshire)
Nicolson, Nigel (Bournemouth, E.)


Craddock, Beresford (Spelthorne)
Howard, Hon. Greville (St. Ives)
Nield, Basil (Chester)


Crookshank, Capt. Rt. Hon. H. F. C.
Hulbert, Wing Cdr. N. J.
Nugent, G. R. H.


Crosthwaite-Eyre, Col. O. E.
Hurd, A. R.
Nutting, Anthony


Crouch, R. F.
Hutchinson, Sir Geoffrey (Ilford, N.)
Oakshott, H. D.


Crowder, Sir John (Finchley)
Hylton-Foster, H. B. H.
Odey, G. W.


Crowder, Petre (Ruislip—Northwood)
Jenkins, Robert (Dulwich)
O'Neill, Phelim (Co. Antrim, N.)


Davidson, Viscountess
Jones, A. (Hall Green)
Ormshy-Gore, Hon. W. D.


Deedes, W. F.
Joynson-Hicks, Hon. L. W.
Orr-Ewing, Charles Ian (Henden, N.)


Digby, S. Wingfield
Kaberry, D.
Osborne, C.







Partridge, E.
Scott, R. Donald
Tilney, John


Peake, Rt. Hon. O.
Scott-Miller, Cmdr. R.
Touche, Sir Gordon


Perkins, W. R. D.
Shepherd, William
Turner, H. F. L.


Peto, Brig. C. H. M
Simon, J. E. S. (Middlesbrough, W.)
Turton, R. H.


Peyton, J. W. W.
Smithers, Sir Waldron (Orpington)
Tweedsmuir, Lady


Pilkington, Capt. R. A.
Smyth, Brig. J. G. (Norwood)
Vane, W. M. F.


Pitman, I. J.
Soames, Capt. C.
Vaughan-Morgan, J. K.


Powell, J. Enoch
Spearman, A. C. M.
Wakefield, Edward (Derbyshire, W.)


Price, Henry (Lewisham, W.)
Spens, Rt. Hon. Sir P. (Kensington, S.)
Wakefield, Sir Wavell (St. Marylebone)


Prior-Palmer, Brig. O. L.
Stanley, Capt. Hon. Richard
Walker-Smith, D. C.


Raikes, Sir Victor
Stevens, G. P.
Ward, Hon. George (Worcester)


Redmayne, M.
Steward, W. A. (Woolwich, W.)
Ward, Miss I. (Tynemouth)


Rees-Davies, W. R.
Stoddart-Scott, Col. M.
Webbe, Sir H. (London &amp; Westminster)


Remnant, Hon. P.
Storey, S.
Wellwood, W.


Renton, D. L. M.
Strauss, Henry (Norwich, S.)
Williams, Rt. Hon. Charles (Torquay)


Roberts, Peter (Heeley)
Studholme, H. G.
Williams, Sir Herbert (Croydon, E.)


Robertson, Sir David
Summers, G. S.
Williams, Paul (Sunderland, S.)


Robinson, Roland (Blackpool, S.)
Sutcliffe, Sir Harold
Williams, R. Dudley (Exeter)


Robson-Brown, W.
Taylor, Charles (Eastbourne)
Wilson, Geoffrey (Truro)


Rodgers, John (Sevenoaks)
Taylor, William (Bradford, N.)
Wood, Hon. R.


Roper, Sir Harold
Thomas, Rt. Hon. J. P. L. (Hereford)
York, C.


Ropner, Col. Sir Leonard
Thomas, Leslie (Canterbury)



Ryder, Capt. R. E. D.
Thomas, P. J. M. (Conway)
TELLERS FOR THE NOES:


Salter, Rt. Hon. Sir Arthur
Thompson, Lt.-Cdr. R. (Croydon, W.)
Sir Cedric Drewe and Mr. Wills.


Savory, Prof. Sir Douglas
Thorneycroft, Rt. Hn. Peter (Monmouth)



Question put, and agreed to.

New Clause.—(PURCHASE TAX RELIEF FOR TAX-PAID STOCKS.)

(1) The Treasury may by regulations provide for mitigating the financial loss to persons who own goods for the purpose of resale where purchase tax has become chargeable in respect of those goods prior to, and of an amount exceeding the tax (if any) chargeable in respect of goods of the same description and whole sale value by reason of effect being given to any changed provisions whereby—

(a) goods of that description cease to be chargeable goods; or
(b) the rate at which tax is chargeable in respect of goods of that description is reduced; or
(c) goods of that description become included in a prescribed list for goods of that class; or
(d) the amount specified in such list in relation to goods of that description is increased.

(2) Regulations under this section may contain incidental and supplementary provisions and may in particular provide—

(a) for defining the classes of persons qualifying for payments;
(b) for computing the quantity of goods of any description or wholesale value in respect of which payments are to be made;
(c) for paying, to those persons and in respect of those goods, out of moneys received by the Commissioners of Customs and Excise on account of purchase tax, sums not exceeding the amount of tax which was chargeable in respect of those goods less the amount of tax, if any, chargeable in respect of goods of the same description and wholesale value under the said changed provisions;
(d) for requiring, as a condition precedent to receiving payment in respect of any goods, an undertaking from the recipient that he has reduced the price at which he offers for sale goods of the same description and wholesale value by an amount not

less than that by which the tax chargeable in respect of goods of that description and wholesale value has been reduced;
(e) for the imposition of penalties in respect of any contravention of or failure to comply with the regulations, so, however, that no person shall by virtue of this paragraph be liable for any offence to imprisonment for a term exceeding twelve months or to a fine exceeding five hundred pounds.

(3) This section shall be construed as one with Part V of the Finance (No. 2) Act, 1940. —[Mrs. Castle.]

Brought up, and read the First time.

Mrs. Barbara Castle: I beg to move, "That the Clause be read a Second time."
This Clause, or one like it, has appeared on the Order Paper during consideration of the Finance Bill for a number of years. It was, in fact, tabled as the official Opposition new Clause in 1950 in even more emphatic terms than those in the Clause which is tabled today. Indeed, the powers given to the Treasury in the Clause in 1950 were mandatory and not permissive. The Clause appeared again in 1951. Some of us pointed out last year that the Clause taken in 1951 by the Opposition of that day appeared with no fewer than five names of members of the present Government, including the present Financial Secretary to the Treasury.
When the hon. Member for Louth (Mr. Osborne) and I raised this matter last year, we merely became the foster-parents of the child of a number of distinguished occupants of the Government Front Bench, who looked extremely uneasy on being reminded of the parentage of a


child who, as a result of their going up in the world, they were anxious to disown. The Financial Secretary, in particular, looked acutely embarrassed during last year's debate, and with the idea of postponing the evil day he fell back on the time-honoured expedient of referring the subject matter of the Clause to a Committee.
The Hutton Committee duly reported in March of this year and to the obvious relief of the Government advised them to wash their hands of the child of the days less reputable when they were sowing their wild oats in Opposition. There is something rather indecent in the uncritical haste with which the Government took the advice of the Hutton Committee. Although the report was available only in March of this year already in his Budget speech the Chancellor of the Exchequer was making it clear that he accepted it outright.

9.0 p.m.

Mr. Boyd-Carpenter: I am sure the hon. Lady does not want to get the facts wrong. The report is dated 4th February and was in the hands of my right hon. Friend on that date.

Mrs. Castle: I am afraid that the hon. Gentleman is obliquely embarrassing the President of the Board of Trade who refuses to take the date of the acceptance of a report, as witness the report of the Monopolies Commission on the match cartel, as any measure of the date on which Government consideration should be given. Therefore, what is sauce for the goose is sauce for the gander and I shall be happy to remind the President of the Board of Trade of the remark of the Financial Secretary.
I think the hon. Gentleman will agree, however, that it was only within a brief period of the publication of the Hutton Committee Report that the Chancellor was making it clear in his Budget speech that he accepted the recommendations outright, and he has not at any time made any pretence to the House of having considered their recommendations with care or felt it necessary to explain to the House why he has adopted those recommendations.
This has been in marked contrast to the attitude of the Chancellor to the Report of the Grant Committee, which

was published several weeks ago and on which we are still waiting to learn his attitude. Indeed, there would have been no opportunity for this Committee to discuss the Hutton Report at all if my colleagues and I had not tabled this Clause. It is rather saddening that hon. Members opposite, who used to express such an interest in this matter, should have been so intimidated by the scowls and embarrassment of the Financial Secretary that they failed to support on the Order Paper our attempt to get this report considered seriously by this Committee before the Chancellor dealt with the matter in the summary way that he has done.
In the first place, it is obvious that the Government would never have set up this Committee of important and busy men if the point at issue had not been a substantial one. That point is the financial effect on retailers of a reduction in Purchase Tax. The problem arises from the fact that the retailer has to pay the Purchase Tax when he buys the goods and can only recoup the tax when he sells them. If, during that period between buying and selling, there is a reduction in Purchase Tax the retailer has found, particularly in the buyers' market of today, that he stands to suffer the loss of the amount of tax which he has paid on the stocks he holds when a reduction of Purchase Tax is announced in the Budget.
Hon. Members on both sides of this Committee have on many occasions testified to the extent of the loss which retailers suffer and to the unfair burden which is placed upon them. Indeed, the Hutton Committee does not deny that this loss takes place although they argue that the loss is less serious on some goods than on others. Hon. Members who have read the report will know that the Committee went to a great deal of trouble to examine possible methods of making a rebate of tax to retailers in order to mitigate or to remove this loss. Clearly, they would not have gone to all this trouble of examining alternative methods put to them if the loss had not been a real one.
We can get some idea of the amount of money involved from the Committee's own estimate that there are half a million traders who carry stocks on which Purchase Tax is paid, and that the amount of tax they have paid on the stocks they carry at any given time is in the neighbourhood of £75 million.
This ethical point of whether it is right that the retailer should carry this burden as a result of Purchase Tax reductions is not the one with which I am primarily concerned tonight. I believe it is an unfair burden to put on the retailer. I argued that last year and stand by it this year. What I am primarily concerned with tonight is the consequences of this unfair burden on the economy of the country. Quite clearly, if a retailer is to suffer financially quite heavily from changes in the Budget he will take evasive action to avoid the loss.
He would not be a good businessman if he did not do that. Obviously, he has done it and will continue to do it. The evasive action which he takes is, within the three months prior to the Budget, to reduce the stocks he carries to as low a point as possible so that—if the tax he has paid on those stocks is reduced—his loss consequent upon his having to sell the goods at the new lower level of prices is reduced to the minimum.
The effect will be very disturbing not only on the trade of the retailer—it will not only reduce the stocks in the shop—but a disturbance of trade will go further back. It will go right back to the manufacturers. If in January, February and March the retailer is lying low and saying he will not buy he has failed to place orders earlier which the manufacturer would be busy meeting in the autumn, from October onwards.
The Hutton Committee considered this point very seriously and were obviously concerned about it. They quote in some detail representations made to them by manufacturers and producers in which it is pointed out very clearly that present arrangements under which no rebate scheme operates have a clearly dislocating effect upon the flow of production. For example, there is the Federation of British Carpet Manufacturers and I am expecting a very passionate intervention from the hon. Member for Kidderminster (Mr. Nabarro) during the course of this debate. The Federation told the Hutton Committee that:
In the past year or so and particularly during the recent recession in trade, some manufacturers have been seriously embarrassed by the fact that towards Budget time there is almost a complete cessation of orders in the home market.

Similar complaints came from the footwear trade, which told the Committee that
retailers restrict their purchases of footwear prior to each Budget. This, in turn, causes wholesalers to reduce their orders to the factories, with the result that the productive efficiency of manufacturers is severely effected.
The Cotton Board made a very strong point of the effect on the textile trades. They said that the retailers' desire to avoid loss
distorts the buying habits of retailers, causing them to hold a minimum of taxed stocks, and it will postpone or restrict buying for a long period before every Budget day in anticipation of possible tax changes. This seriously interferes with production programmes and interrupts the normal flow at a most important time of the year. The fact that Budget day falls at the height of the spring season for textile goods means that interference with production prior to that day is likely to cause regular conditions of recession just at the time when the season's business is at stake. This has been an important contributory factor in the abnormal conditions in the textile trade during the past nine months.
That, of course, is a matter of grave concern to every hon. Member who represents a textile constituency and who knows that the textile industry of this country can ill afford additional disturbance and the tendencies to depression which the present situation involves. I could quote other examples such as that of the toilet preparation manufacturers who all gave evidence for the same purpose.
The fact that the retailer suffers a loss is therefore established, because if there were no loss there would be less of this disturbance. We can take it as a fact that there is a loss and that this has been established more effectively than the Hutton Committee are prepared to admit, because the contents of their own report, in my view, invalidate some of its conclusions about the extent of the loss.
The Hutton Committee, therefore, came to the point of examining whether there was an practical method whereby the retailer could be reimbursed for this loss which he was liable to incur and could be encouraged to maintain the normal flow of orders, which, in turn, would maintain the normal flow of production in the factories and give us more efficient and economical production. After examining these methods, in my view not very exhaustively, the Hutton Committee dismissed them as impracticable, but it is very interesting to note that, quite clearly, the Committee considered


the situation to be serious, because they went on to make a recommendation of very important Budgetary effect to meet that situation.
What they recommend is that, because this dislocation takes place, and in order to avoid it, and because the Hutton Committee cannot satisfy itself that there is any 100 per cent. water-tight rebate scheme, then any future Chancellor of the Exchequer should renounce the use of Purchase Tax as an instrument of national planning. [HON. MEMBERS: "Hear, hear."] Hon. Members opposite obviously agree with that, but we on this side of the Committee do not.
This is what the Hutton Committee go on to recommend. They say that this burden falls on the retailer and this consequent dislocation of trade takes place, which is a bad thing, and therefore, to obviate it, Purchase Tax changes in future should be small in amount and reductions should be small and regular rather than large and selective and liable to fluctuation. What that means is that to protect the retailer and manufacturer from the consequences of the Treasury's failure to produce a workable rebate scheme, any future Chancellor of the Exchequer is to be inhibited from radical and selective changes in Purchase Tax— changes which he might consider necessary to meet some urgent economic need in the country.
He might, for instance, want to wipe Purchase Tax out altogether on some articles to meet an acute unemployment situation. He might want to increase Purchase Tax for very good and sufficient reasons of economic planning. It is very interesting to see the opinion of the "Financial Times" on the fact that the Chancellor of the Exchequer hastened to adopt this attitude of the Hutton Committee.
9.15 p.m.
The Chancellor of the Exchequer, in his Budget speech, made it clear that in his Purchase Tax proposals he had adopted the recommendations of the Hutton Committee. He adopted those recommendations because he does not believe in using the Budget as an instrument of economic planning, and does not look upon Purchase Tax, as we do, as an instrument for guiding demand or helping employment policy.
It is, therefore, interesting to find the "Financial Times" severely criticising him for having told the House that in this Budget he was going to make a small overall reduction in Purchase Tax at an equal percentage over the whole range of goods. He said, in effect, "It is no use anyone saying Purchase Tax ought to be reduced more on this item or that, for the perfectly good reason that I cannot do it, because the Hutton Committee said it would be a bad thing to do." The "Financial Times "called this "an admission of gross administrative incompetence" by the Chancellor. In a leading article of 17th April, it comments that we have come to the quite ludicrous situation in which the Chancellor cannot make the taxation changes he considers desirable in the economic interests of the country because he has failed to find some 100 per cent. watertight method of meeting the loss to retailers.
The Hutton Committee admit that this problem is serious. Therefore we have the position that if we allow the present situation to go on the results will be quite serious for our production and our trade and for the efficiency of our economy. We are told that the only way to offset the serious disadvantages of the present situation is for the Chancellor of the Exchequer to adopt, in regard to Purchase Tax, a policy of small and regular changes.
I suggest to the Committee that in accepting the recommendations of the Hutton Committee the Chancellor, far from solving the problem, has made it a good deal worse. In this Budget we have the first substantial overall reduction in Purchase Tax which we have had since the tax was introduced—[HON. MEMBERS: "Hear, hear.]—yes, I give hon. Members opposite that. I do not think that necessarily there is any merit in it. That reduction has been accomplished at the cost of other socially desirable things. Of course, anybody who does not mind destroying the social and economic fabric of the country can always produce facts and figures in favour of such a reduction.
What the Chancellor has done is to accept what the Committee have said, that the only way of getting rid of the rebate problem is to make progressive small reductions in Purchase Tax until this very naughty tax is wiped out.


[HON. MEMBERS: "Hear, hear."] The shortsightedness of hon. Members opposite is remarkable. What does it mean in terms of the problem we are attempting to deal with tonight? It means that every industry making goods which carry Purchase Tax has been given a warning that so long as there is a Conservative Government in this country every year we can expect a further percentage reduction in Purchase Tax.
The "Financial Times," in the same leader to which I have already referred, makes that quite clear. This is what it says:
Taken in the context of the Budget speech, the Chancellor's statement almost reads like a fair warning to retailers that he proposes to spread their capital losses on tax-paid stocks over four years, in order to allow a twelve months interval to recuperate from each 25 per cent. cut.
The cost to the retailers this year has been estimated by the Chancellor himself as running at about £13 million, and that is probably a modest estimate. If the retailers are now being warned that, if the right hon. Gentleman is Chancellor in the coming year, there may well be a further loss of £13 million, £14 million or even £18 million on their shoulders, what in effect the right hon. Gentleman has done is to stimulate them to take even more effective evasive action.
Clearly the uncertainty about Purchase Tax has gone and in its place we have the certainty of progressive reductions. Every retailer will gamble that next year there will be another overall percentage reduction. In other words, if they are foolish enough to buy in any stocks they will be asking for a loss. We can expect very profound repercussions on a wide range of our manufacturing industry as a result of this situation, because from October this year onwards we shall begin to find an outcry among manufacturers of radio and television sets, toilet preparations, textile goods, carpets, footwear and so on, that orders from retailers have practically dried up. I think the Chancellor is asking for a very serious dislocation of production over a very wide front.
What has happened is that, far from having met this problem by the adoption of the Hutton Committee recommendation on Purchase Tax, the Chancellor of the Exchequer has made the situation a great deal worse, and the problem will be

intensified because the Hutton Committee and the Treasury have not been prepared to go into alternatives with sufficient care and thoroughness. On reading this report, I am not satisfied that all the possible methods of working out a rebate scheme have been examined. It is not good enough for the Government just to accept this situation. It is, as the "Financial Times" said, an admission of gross administrative incompetence to wash their hands of the problem and to say that nothing can be done.
The Chancellor will be aware that the Hutton Committee suggested that the situation might be met by an extension of the sale-or-return scheme, and the Committee pointed out that, to be effective, this might need some amendment of the law and that the whole problem ought to be further examined by Customs and Excise and the trades concerned. Has that been done? Is the Chancellor going to give any answer on this tonight? Is he in favour of legislative changes to make possible an extension of the sale-or-return scheme?
If he rejects that, what about other proposals which have been put forward— for instance, making Purchase Tax changes by Treasury order instead of making them at the most crucial moment, in the spring, in the Budget itself? What are his views on that? Failing that, can he tell us what his views are on other proposals which have been strongly pressed—the ante-dating scheme, for example, which, in my view, merits a good deal more consideration than it receives in the Hutton Committee Report? In fact, it receives no specific consideration by name at all in the Hutton Committee Report.
All that the Hutton Committee says about these schemes is not that they are unworkable or impracticable but that they are rough and ready. One thing certain is that the continuation of the present system is very rough on retailers and manufacturers. What the Chancellor has done by the present Purchase Tax proposals is to make the situation a great deal worse than it was before. We can now absolutely rely on the fact that there will be a drying up of trade from this autumn over a wide range of consumer goods until the next Purchase Tax reduction has been made in the Chancellor's next Budget.
I should have thought that, in the economic situation in which we now find ourselves, that was an intolerable prospect, and, certainly, an intolerable prospect for the textile trade. As the Chancellor of the Exchequer has created the problem, perhaps the Financial Secretary will tell us what he is going to do about it, because it cannot be allowed to remain as it is. Having created the problem, it is up to the administrative minds of the Treasury and the Government Front Bench to work out a rebate scheme which will remedy all the production evils of the present situation.

Mr. Cyril Osborne: Last year, I had the privilege of submitting a Clause similar to the one the Second Reading of which the hon. Lady the Member for Blackburn, East (Mrs. Castle) has just moved. Indeed, she said that we were the foster parents of the scheme which was really proposed by my hon. Friend who is to reply to the debate.
There is one point which I think the hon. Lady overstressed and thereby rather weakened her case. She accused us on this side of the Committee of destroying the social and economic structure of the country by agreeing to a reduction of the Purchase Tax. Coming from the hon. Lady, who believes very sincerely and deeply that the whole of the retail trade and the people who are affected by this proposal should be driven out of business——

Mrs. Castle: Nonsense.

Mr. Osborne: Oh, yes, the hon. Lady really believes that distribution and exchange should be nationalised, and that would be a social and economic change in the country that would be a great deal more violent than what is proposed here, and the hon. Lady should face it.
May I say, as one responsible for the similar Clause last year, that I was very disappointed with the Hutton Report? I had hoped that something would be done for the small shopkeeper for whom I spoke last year. These small traders have told me that they realised that the difficulties were enormous, but they thought that the Excise people were the niggers in the woodpile. They thought that the Treasury should be able to find a way round these difficulties. Having had the report, and having discussed it with my constituents

and with many of my friends in the trade, I came to one or two conclusions upon it.
The first thing I learned from the traders came from the electrical side of the retail industry, which was very much affected by it. One of the shopkeepers told me that, in the first place, they thought something was going to happen in this year's Budget proposals, and therefore, they deliberately reduced their stocks. Consequently, the loss to them is not nearly as great as if they had had normal stocks. Secondly, they said that some manufacturers, though not all, and some of their principal suppliers, had given them a rebate on the stocks ordered between February and April, so that the manufacturers themselves shared in the loss which the retailer now faces. Thirdly——

Mr. Anthony Greenwood: Mr. Anthony Greenwood (Rossendale) rose——

Mr. Osborne: I cannot give way; the hon. Gentleman will be able to make his point afterwards.

Mr. Greenwood: I only want to clarify a point which the hon. Gentleman made.

Mr. Osborne: The third point was that, as a result of the reduction in Purchase Tax, trade was considerably better, and it was suggested to me that traders would like the whole of the Purchase Tax to come off, and they would take the risk of losses on stocks, because they would regain it in the profit on the extra trade which they would have.
9.30 p.m.
There is one other point which was put to me by another group of traders. A letter was sent to the Chancellor on 23rd March from six of the biggest distributors in the City of London, in which they said:
The suggestion of the Hutton Committee that in the normal buyer's market retailers can sell existing stocks without mark downs is, in our opinion, with minor exceptions, utterly unrealistic.
I think that the Treasury ought to face that fact, and I do not think that the Hutton Committee did its work well on that point.
The letter went on to say:
For these reasons, we feel that, despite the difficulties, with which we feel sympathy, of devising a practicable rebate scheme, it is the responsibility of the Government to take steps to safeguard retailers from the risk of loss.


I do not know what reply my right hon. Friend made to that letter, but I hope that my hon. Friend will make some observations on the two extracts I have read to the Committee. What was said in the letter is still true, and even if my right hon. Friend cannot do it now I hope that he will not give up, but will have another try next year.
I must say that I was bitterly disappointed with the report of the Hutton Committee. I thought that they would have done considerably more than they did for the small trader. Finally, Item 4 on page 43 of the recommendations—and this is something which really the Treasury could look at—says:
Official assistance should be given to schemes formulated by retailers and their suppliers.
I think that something should be done, and I ask the Treasury to look at that point in particular, because if they would help to that extent we should be grateful. Even if we cannot have another Hutton Report, I hope that between now and next year's Budget we shall have a Departmental report which will give us greater hope than we received from the Hutton Report.

Mr. Anthony Greenwood: I rose in the course of the speech of the hon. Member for Louth (Mr. Osborne) in the hope of elucidating one of the points he made. I realised, however, that that was a vain hope, and, therefore, I did not persist in trying to persuade the hon. Gentleman to afford me the usual courtesy of giving way when an hon. Member on the other side of the Committee rises to make a point.
I was sorry that the hon. Gentleman went out of his way to criticise my hon. Friend the Member for Blackburn, East (Mrs. Castle), with whom, on this subject, he worked so closely a year ago. Indeed, while the hon. Gentleman was speaking, I checked up the OFFICIAL REPORT for that occasion, when the right hon. Member for Blackburn, West (Mr. Assheton) said:
I rise to congratulate my hon. Friend the Member for Louth (Mr. Osborne) on bringing forward this admirable new Clause, and I should like to congratulate the hon. Lady the Member for Blackburn, East (Mrs. Castle) for having the wisdom and good sense to add her name …"—[OFFICIAL REPORT, 27th May, 1952; Vol. 501, c. 1295–6.]

I can only wish that the hon. Member for Louth had had the good sense to add his name to the Clause moved by my hon. Friend this year, and, indeed, as my hon. Friend the Member for Blackburn, East points out, that the right hon. Member for Blackburn, West who, I am sorry to see is not with us on this occasion, had likewise added his name to it. I had hoped that the hon. Member for Louth would have spoken in some support of his right hon. Friend the Chancellor, but all we had from him was a series of regrets for the action which the Government have taken and for the contents of the Hutton Report. On that, I have a great deal of sympathy with the hon. Gentleman.
My hon. Friend the Member for Blackburn, East referred to what she regarded as the indecent haste with which the Chancellor accepted the Hutton Report compared, shall we say, with the coyness with which he is approaching the Grant Report which also deals with Purchase Tax. My hon. Friend was, perhaps, more charitable than I am, but it seemed to me when I heard the Chancellor's Budget speech that the reason for his ready acceptance of the Hutton Report was quite apparent. On that occasion, he pointed out that he could not very well reduce Purchase Tax further because of the injustice that would be done to the retailers. I do not think there has ever been such an unconvincing display of regret since the Walrus and another Carpenter ate the oysters, until, of course, we had the speech of the hon. Member for Louth a few moments ago.
The hon. Member for Louth has been making researches into the reactions of traders to the Government's proposals. I should like to add, for the enlightenment of the Committee, the reactions of retailers on a rather wider scale. The National Chamber of Trade has recently been having a conference, and at that conference Mr. Bradshaw, who is Past President of the National Chamber of Trade and Deputy-Chairman of the Chamber of Trade's Board of Management, made a speech which was extremely critical of the Chancellor of the Exchequer and his policy. I should like to quote to the Committee what Mr. Bradshaw had to say.
It was quite clear that he had Conservative Members in mind, as will be


apparent to the Committee in a few minutes. He said:
We seek the same co-operation and sympathy from all M.P.s who stand for the British way of fair play and common justice to its citizens.
He went on to say that he knew now why the Chancellor of the Exchequer accepted the report so readily. He said:
We know now why. Mr. Butler was planning further cuts in Purchase Tax rates to support his incentive Budget. These cuts cost thousands of loyal subjects an aggregate loss of some £10 million. It is another case of smash and grab—grab as much as you can from the big people and smash the little trader to bits. This report, Hutton's folly, has become Butler's folly. Parliament must see that it does not become the nation's folly.
That is the former chairman of the National Chamber of Trade referring to the party which is the party of the little man, the party of the people who support the little shop around the corner. The Deputy-Chairman of the National Chamber of Trade accuses them of smash and grab—smash the little man and do something only to help the big man. I do not think that my hon. Friend the Member for Blackburn, East was unfair in what she said, for the truth of the matter is that Mr. Bradshaw has clearly "rumbled" the Chancellor of the Exchequer.
My hon. Friend referred to the unfair burden, which she believes the retailers are unwilling to bear. I believe she was right in what she said. I think the retailers are being unfairly treated, but I do not think it is particularly relevant to this problem whether they are being treated fairly or not. The important thing is that they are absolutely convinced that they are bearing an unfair burden. An important aspect of the matter is that so long as they feel like that there will be an interruption in the flow of production. I want the Committee to consider what that effect will be upon the industry of the country. It is upon that that we substantially base the case that we are putting forward tonight.
In the Hutton Report there is a paragraph 129. I would like to read out the first sentence of that paragraph. The Committee are talking about the allegation that reductions in Purchase Tax, and even the possibility of them, interrupt the flow of trade. The paragraph begins:
Our impression, based on a careful study of all these figures, was that they tended to

suggest that, in general, the argument about dislocation of trade had been somewhat overstated by trade associations.
I do not think it would be possible to devise one fairly short sentence which contained more words of qualification than the framers of the Hutton Report introduced into that one sentence. "Impression, tended, suggest, in general, somewhat": even a Minister of the Crown, faced with a difficult situation in Parliament, could not have devised a more equivocal way of expressing himself. The Committee were quite specific later in the paragraph, when they say, in spite of everything that appeared at the beginning of the paragraph:
Nevertheless, we have no doubt that from time to time anticipation of a change in tax exerts considerable influence on the public's willingness to buy and the retailer's willingness to hold stock; and the statistics we examined were not inconsistent with the possibility of severe dislocation to trade from these causes in particular instances.
The Hutton Committee were in no doubt about that; nor am I.
I want to give the Committee some figures dealing with the interruption in trade which has taken place this year. That interruption is an important factor in the argument which we are adducing. Mr. Bentall, the chairman of one of the largest stores in the suburbs of London, said in his report to the annual meeting of his company in April that this year his firm had lost £12,000 as a result of the reductions in Purchase Tax. A department store in Yorkshire lost £1,725. A small radio shop in one of the London suburbs lost £400.
In the case of a department store on the south coast the radio department alone lost £800 and the whole store £2,877. In another department store on the south coast the carpet department this year lost £300. A suburban department store lost £1,900 on carpets alone and last year lost £1,150 on footwear alone. A small hardware store in the West End of London lost between £100 and £150 this year purely on account of reductions in Purchase Tax.
There are certain categories of traders who have been especially badly hit. I have a list of radio firms up and down the country and of the amounts which they have lost through a reduction in taxation. Other forms of enterprise which have been particularly badly hit are those


dealing with leather goods and domestic appliances of one kind or another. One of the difficulties which we have to face in obtaining statistics of this kind is that not sufficient time has elapsed since the Budget proposals were announced for a large number of retailers to have obtained really up-to-date figures.
That is particularly the case in respect of textiles and footwear and other things which are not resale price maintained, because when the reduction of tax takes place, the retailer, perfectly naturally, still hopes to sell as much of his stock as he can at the old price in order to protect himself against the loss which otherwise he would suffer.
In the case of textiles and footwear it is difficult to obtain absolutely reliable retail figures, but I have obtained figures from manufacturers of boots and shoes outside my own constituency of Rossendale. I find that, generally speaking, the amount at risk under Purchase Tax in relation to the profits made by a company before taxation averages between 10 per cent. and 15 per cent. in the case of most footwear manufacturers. In the case of manufacturers producing the highest quality goods it may be as much as 33 per cent.
When one has sums of money of that kind involved, it is quite obvious that every retailer will be reluctant to lay in stocks of goods which, when the Budget comes along, he may have to sell at a price considerably less than that which would cover the amount he paid in taxation. An article in the "Financial Times" of 5th June, on the sale of domestic appliances, said:
Under present budgetary conditions February and March tend to become dead months, and any cuts in Purchase Tax that then arise have to be borne on subsequent sales, which, in past experience, can mean that profitable sales are reduced to those achieved in seven or eight months of the year.
It seems to me not unnatural that in these circumstances retailers should be reluctant to lay in stocks which are subject to taxation.
As my hon. Friend the Member for Blackburn, East rightly pointed out, that tendency will be increased from now on. In the past, in most years, there was very little likelihood of substantial reductions in taxation. But this year hon. and right hon. Members opposite have made such

a reduction in taxation and, however justified it may be, there is certainly a general expectation among the commercial community that it is part of a four-year plan for abolishing Purchase Tax. I should like to think that that was the case, except that to do it in that particular way would introduce uncertainty every year, with the consequences to which my hon. Friend has referred.
9.45 p.m.
Already we are finding the effect of the possibility of a further reduction next year. On 5th June the "Financial Times" had an article on carpets. As did my hon. Friend, I expected that the hon. Member for Kidderminster would be in his place in a debate of this importance and I did not think it necessary to point out that I was going to raise the subject of carpets. The "Financial Times" said:
It is generally expected that next year there will be hesitation in the weeks immediately preceding the Budget in case Purchase Tax is again reduced.
On the following day the "Drapers' Record" had a leading article based on the instructions that have been issued by one of the largest department stores in the West End of London. I have quoted this in an earlier debate, but I quote it again tonight because it has particular reference to the situation under discussion. It says:
Although the next Budget is far ahead, one large store has already started a campaign to apprise suppliers of the serious dislocation of business expected early next year in view of the greater uncertainty which will exist regarding possible Purchase Tax changes and seek their help in alleviating the problem. Further, one of the country's biggest store groups has instructed its buyers to adopt a hand-to-mouth policy for spring merchandise carrying tax.
That is an extremely serious situation, as many hon. Members opposite know perfectly well, and it is one which the Government and the Hutton Committee have refused to face. That is not good enough. Here we have these two proposals which the traders have put forward —First, the extension of the "sale or return" scheme, which has been turned down by the Hutton Committee, but which the retailers still believe it is possible to put into operation——

Sir Harold Webbe: The Hutton Committee supported the "sale or return"


scheme. They did not turn it down. Only those who cannot work it have turned it down.

Mr. Greenwood: I am sorry. The hon. Member is perfectly right. The Hutton Committee expressed the hope that the "sale or return" scheme would be extended, but the Chancellor of the Exchequer has done nothing about it.
The other proposal is the "antedating" scheme, to which the Hutton Committee do not refer by name, but appear to dismiss on what I think are completely inadequate grounds, that it would not do perfect justice to all the individuals concerned. It would certainly go a long way towards doing a great deal of justice to many of the people concerned. The hon. Member for Louth (Mr. Osborne) was perfectly right, last year, when he told the Committee that the "ante-dating" scheme was, in his opinion, perfectly workable. Certainly, the retailers' organisations are strongly in favour of it.
I want to hear from the Government why they are not prepared to undertake further negotiations with the trade to see whether this proposal cannot be put into effect. I believe that the objections raised by all sections of the Committee in the corresponding debate last year were sound. I do not think they have all been adequately considered by the Government or the Hutton Committee, and I should like an assurance tonight from the Chancellor of the Exchequer or the Financial Secretary that their minds are not closed upon this problem, and that we may have an undertaking that they will give sympathetic consideration to this question and will be able to make a helpful statement on the subject on the Report stage.

Sir H. Webbe: I have listened with very close attention to the speech of the hon. Member for Blackburn, East (Mrs. Castle), and I listened to a great deal of it with sympathy. I venture to say that there is no Member of the Committee—and I include my right hon. Friend the Chancellor—who would not like, if he could, to remedy what is undoubtedly an injustice and, in many cases, a serious hardship. It is beyond argument that the reduction of Purchase Tax involves retailers holding stocks of Purchase Tax

goods in the loss of the tax which has been overpaid on those goods. I am quite certain that the Chancellor will certainly see to it that the Treasury will continue to consider finding a reasonable and proper solution, but let us be quite clear that any solution must fulfil certain minimum conditions. In the first place, it must be administratively possible. In the second place the basis on which tax is to be refunded must be not, as the hon. Lady said, watertight, but sufficiently precise to ensure that the refund of tax is fair to the Exchequer as the representative of the taxpayers as a whole and reasonably fair as between one trader and another.
I have given a great deal of thought to this matter because from the very nature of my constituency I have had more opportunities, perhaps, than I sought of discussing all these proposals with the trade associations, with the officers of those associations and with individual traders in many walks of life. I have some little experience of the manufacturers' end of this business, too. I must say quite frankly to my right hon. Friend that I am not satisfied that any one of the schemes that have been suggested fulfils the conditions that I have suggested are the minimum as a basis for a proper scheme for refund of Purchase Tax.
Clearly, the refund of tax must be related, or should be related, reasonably closely to the stocks in the hands of dealers on which they have suffered loss. To ascertain those stocks precisely, which was, of course, the first and obvious suggestion, is clearly impossible. It involves taking stock in some half a million separate establishments at the same date and producing certificate stocks on which the Treasury will be justified in refunding tax. I do not believe that that is a physically possible thing today.

Mrs. Castle: The hon. Gentleman, of course, realises that such will not be necessary under the ante-dating proposal.

Sir H. Webbe: I am going to deal with the ante-dating and the two other suggestions that have been made, but, first, I suggest to the Committee that the precise ascertainment of stocks is physically impossible. We cannot get half a million people who are capable of certifying stocks as they are on one particular day in the year. Then there has been the


suggestion of refunding tax, not by ascertaining precise stocks but by finding some reasonable basis on which to estimate stocks. Superficially, the most attractive is the one referred to as the ante-dating scheme, under which we take a whole year's purchase of goods and divide by the factor which is dependent on the rate at which those goods normally turn over.

Mrs. Castle: No.

Sir H. Webbe: Perhaps I have given it the wrong name, but it is the second suggestion, that we take a fraction of the year's purchase of goods related to the speed of turnover. That, in my view, is impracticable, too. On the surface it appears to be an attractive and sensible way of dealing with the problem, but the rate of turnover varies almost from days to months as betwen one group of goods and another; it varies very widely as between one lot of goods within a group and another lot in the same group; it even varies very widely as between one locality and another; and it is administratively quite impossible to arrive at any reliable figure of rate of turnover so as to make a graded assessment of the likely stocks.
Then there is the pure ante-dating scheme, which I described wrongly, which entails remitting taxation on goods purchased within two months of the reduction in the tax. That scheme would lead to injustice and inequality in comparison with which any of the present arrangements are simplicity itself. The rate of turnover of stock in a dealer's hands may well be once in 12 months, but in the case of another man it may be twice a week. If we decide upon a two months' remission of tax we shall be giving one man a sixth of what he is entitled to and the other man eight times his entitlement.
The variation would be so absurdly wide that I cannot believe that, in practice, the scheme would lead to other than the most bitter recrimination as between one trader and another and a flow of demands and criticisms to the Chancellor which would be never-ending.

Mrs. Castle: If the hon. Gentleman is right in saying that it would lead to bitter recrimination, why is it that the trade is pressing it so strongly?

Sir H. Webbe: I assure the hon. Lady that I have discussed the scheme with those who have put it forward, and they

themselves have to admit that it would be impossible to arrive at what even the most optimistic of us call rough justice by that method. It is the best method that they can suggest, but no one of them will maintain that it would produce a just and reasonable settlement.
That may be a matter of argument, and I do not want to enter into an argument as to whether they are right or not; I believe that it is not a practicable suggestion. I am driven to the conclusion that at the moment the problem is completely insoluble and that it is not possible for the Chancellor to do what the Clause calls upon him to do. Consequently, I could not think of supporting the Clause.
However, I want to follow the hon. Lady in the other part of her argument which seemed to me to be even more important.

Mr. Anthony Greenwood: Before the hon. Member passes to another point, might I point out that he is being very unfair to the various organisations of retailers in saying that they think what he has said. I believe he is really putting his own point of view. The view of the organisations of retailers is that it is impossible to find a perfect scheme but, on the whole, they think that the ante-dating scheme is a good deal better than that which operates at present.

Sir H. Webbe: Each set of traders is prepared to think that its own scheme affords a rough and ready solution, but I have not found a single group of traders which approves anybody else's suggestion. There is no unanimity on this matter. There is a wide diversity of view because of the obvious and reasonable desire of everyone to find an answer.
The hon. Lady referred to what I regard as a much more important point, the grave dislocation which occurs not only in the retailers' trade but, even more important, in industry because changes in Purchase Tax are associated with the annual Budget. It is not the uncertainty of tax or the weight of tax which causes the dislocation; it is the uncertainty about what is going to happen on a fixed date in the future. There is no shadow of doubt that that dislocation of trade was most grave last year, and I agree with the hon. Lady that it is likely to be very much more serious this year. There is anticipation of a further reduction in Purchase Tax, and it is inevitable that that


will lead to a complete hold-up in industry towards the end of the autumn.
I join issue with the hon. Lady because I believe she has given the wrong cause for the dislocation. It is not the evasive action of the retailers in failing to build up stocks which causes the dislocation; it is the evasive action of the general public who will not buy. I assure the hon. Lady that it would not help the manufacturers substantially if all their dealers maintained their full stock. Manufacturers do not live on selling goods to dealers; they live on the dealers selling goods to the public. Even if the dealers maintained their stocks, the evasive action taken by the buying public would be bound to have its reflection in a serious set-back not only in retail trade but, much more serious, in industry itself.

Mrs. Castle: Surely the hon. Gentleman will agree that, from the point of view of getting a smooth flow of production, what is important to the manufacturer is that the retailer should be prepared to go on buying and holding stocks. If he does not think he is going to suffer a financial loss, he will do that, because, whereas the consumer will hold off buying immediately before the Budget, he will immediately rush to take advantage of the stocks if they are there when the Budget announcement is made.

10.0 p.m.

Sir H. Webbe: I am sorry to have to disagree with the hon. Lady. I have considerable experience of that particular aspect of the problem, and I can assure her that although the fact that dealers are reluctant to hold more than a minimum trading stock is a contributory feature it is only a very small fraction of the problem. It would not help the manufacturer of goods which are subject to high Purchase Tax if all the dealers continued to hold their normal working stocks throughout the year. It makes very little difference indeed. Only a very
small percentage of the turnover is represented by stocks in dealers' hands. I am quite certain that it is so in a wide variety of trades.
But the effect on industry of this evasive action by the buying public is serious and I join wholeheartedly with her on that. I am convinced that unless something can be done to level out

the flow of business we shall experience, next winter and early spring, a most serious setback in many manufacturing industries. I want to make a suggestion to my right hon. Friend. I do not expect him to accept it warmly tonight, but it is a suggestion
which must be thought over very seriously. I am convinced that there is no way of avoiding all these losses which fall on the retailer, but I should like to try to temper the loss and the hardship on both the retailer and, more particularly, on the manufacturer.
I would ask my right hon. Friend to consider whether it is absolutely essential that changes of Purchase Tax should invariably be associated in toto with the Budget. Is it not possible for him to watch the out-turn of his Budget, as I am sure he does day by day and week by week, and, if he sees that things are going reasonably well, to make a small overall reduction in Purchase Tax unannounced and not at any definite date? It could be a small amount like a 5 per cent. all round reduction and a little later he could make another 5 per cent., so that we do not find the buying public waiting for that date in April when they will know their fate and keeping off the market in the meantime.
If that element of complete uncertainty could be introduced into the Purchase Tax changes by Order or by administrative action in very small doses in this way, not only would the immediate hardship to the retailer be removed by spreading the burden but a much more regular flow of business to the retailer would be assured. That is a constructive suggestion which I ask the Chancellor to consider. I appreciate the difficulties, but I am quite convinced that unless something is done to avoid what happened last year we shall have a still greater dislocation in industry and trade in the first three months of next year.

Mr. James Hudson: As I listen to hon. Gentlemen opposite I find I have more sympathy than I usually feel about the difficulties in which they are placed. I feared that in this discussion they would have taken a line of escape that might have been open to them, namely, that the reason why they have run away from supporting the same Clause as they themselves brought before the Committee last year was because the Chancellor had done something effective


to meet the point of view of their own new Clause of a year ago.
They have not taken that line. I admire the hon. Gentleman the Member for Louth (Mr. Osborne), who still stands by his convictions and bitterly complains at the inadequacy of the proposals of the Government. He knows that the problem of the small businessman who came to him in what he called his political surgery last year, who was already in debt to the bank to the extent of £5,000 and had to find another £2,000 to cover the purchase of articles that he was going to sell in his retail business, has not been faced adequately by what has been done.
The hon. Gentleman speaks quite rightly tonight in terms of resentment at the proposals of the Hutton Committee and at the use by the Chancellor of those proposals. The same thing applies to other hon. Gentlemen. The right hon. Member for Blackburn, West (Mr. Assheton) said that the Clause to which the names of his hon. Friends were placed last year was a sound Conservative Clause, that it was non-mandatory, that it gave the Government an opportunity to look for something better if they could find it, but that it called upon them to act.
As hon. Gentlemen opposite still think that the Hutton Committee have not faced, and the Government have not applied, the practical proposals that came before the Hutton Committee from the retail traders, I should think they are bound tonight to support the hon. Lady the Member for Blackburn, East (Mrs. Castle), and hon. Members on this side of the Committee who have put down the same non-mandatory new Clause as was put forward last year.
As I inferred by a slight interjection in the debate last year, I speak on behalf of a considerable body of co-operators who share with retailers generally the great disability imposed by this unwillingness to deal with an effective grievance. They lose many thousands of pounds. I speak not only on their behalf. I have had a great sheaf of correspondence, as I expect hon. Members generally have had from their own local traders.
Reference has been made to the complaint by Mr. Bentall of the £12,000 he loses by the neglect of the Chancellor to

face up to this position. Mr. Bentall is not only a prominent constituent of the Financial Secretary in Kingston, but has a great emporium in Ealing as well. At the last Election I learned of his great anxiety to keep me out of Parliament, which led to substantial efforts to back up that purpose by the people who were sent into my constituency and the neighbouring constituency. I do not know what Mr. Bentall thinks about his Financial Secretary now, but I am hoping that he will modify his opinion about me in view of the speech I am making on his behalf as well as on behalf of the Cooperative movement, and will decide that I was, after all, not so inimical to his purposes as he had imagined.
I find among the electrical and other industries—of which there are many in my Division in Greenford, Perivale and so on—the greatest resentment at the unwillingness of the Hutton Committee to face the practical suggestions put before them. I agree with those industries that it was quite wrong of the Hutton Committee to suggest that there was a sort of compensation to traders at the time when the tax was put on or increased. The British buying public are a very hard
taskmaster. When they hear that a tax has been put on, knowing that the articles to be sold have been in the possession of the trader and obtained by him at a lower price than that which prevails after the tax, they look for a continuance of an advantage in the price of the article for a week or two, or even a month or two. Indeed, the forces of competition, acting on the trader anxious to snatch at what advantage he can obtain, prevent at the time the tax is put on anything of that compensation implied by the Hutton Committee.
This is a problem that stands by itself and the traders are right. The Co-operative movement are right when they say that in order to meet the problem now placed upon the retail trader the Chancellor should have found—if the Hutton Committee could not find it for him— a better conclusion than that which he has put before us. I agree with my hon. Friend the Member for Blackburn, East, despite what was said by the hon. Member for the Cities of London and Westminster (Sir H. Webbe) about the way in which the buying public settle this issue rather than the Chancellor. I do not think


that the great firm with which the hon. Member is associated always take that attitude. The Chancellor settles a great many issues for his firm and that is not to be placed at the doors of the buying public. I do not think this issue can be placed at their doors. If they see an advantage, the buying public take it whereever they can. It is the duty of the Chancellor of the Exchequer to face that problem and to meet the disabilities that traders feel in this matter.
Although various figures have been given about the losses, I cannot estimate how much loss retail traders will suffer. I know that in the Co-operative movement the losses run into tens of thousands of pounds, taking the movement as a whole. Some estimates have been made that the total cost to what the hon. Member for Louth said were 425,000 local traders affected by this proposal. Those people really ought to be a preoccupation of every hon. Member, particularly hon. Members opposite who make so many promises to them. The cost added up to millions of pounds; how many millions I am not prepared to say. We ought to get tonight from hon. Members opposite a greater willingness than they have yet indicated to support this new Clause.
It is all very well saying that the Chancellor is now left to think it over again. It is all very well for the hon. Member for the Cities of London and Westminster to say to the Chancellor that he hopes he will do this or that during the coming year. What can be expected of the Chancellor of the Exchequer, if, after putting their names to a new Clause on the issue last year and seeing the matter come to a head this year in such a way that everybody realises the necessity for action, hon. Members opposite fail to register in any way their objection to what is taking place. What is the hon. Member for Kidderminster (Mr. Nabarro) going to say? I compliment him; he has found his way into the Committee at last. I hope he will find his way into the Division Lobby. At any rate, some good reason—a better reason than any I have heard—will have to be provided for him if a satisfactory story is to be told to his constituents. I have no doubt that he is pretty good in telling a long story, but it will have to be a pretty long one this time.
The Conservative Party have to face this issue at the present time as they have

not had to face it before; and they do so after all the professions they have made and challenges they have thrown out in the past about the defence of the little man, about setting the little man free, about putting him in a position so that he can fight effectively with the great and powerful trader who tends to crush him out of existence. There is a very special case for the Conservative Party accepting their duty and supporting us in this proposition. At any rate, I am very glad I have had this opportunity to speak, and I will see this matter through with my hon. Friend the Member for Blackburn, East, who moved the new Clause.

10.15 p.m.

Mr. Charles Fletcher-Cooke: I do not think anybody on this side of the Committee disagrees for one moment about the seriousness of the situation and if I am brief I am sure the Committee will not take that to mean that we do not think it is serious.
The reasons which have led hon.
Members opposite to attack the Hutton Committee have scarcely done justice to that Committee. One might have gathered from some of the remarks that the Hutton Committee had approached its difficult task in the spirit of not trying to find a solution whereas it is perfectly clear, and indeed it breathes from every sentence of their report, that they were desperately anxious to find a solution. The fact that they have failed seems to me to be no reason for casting at them the stones which have been cast by hon. Members opposite in the course of this debate.
On the other hand, the fact that they have failed is no reason why we should not try to succeed in the future. I am sure my right hon. Friend will not take the Hutton Committee's Report as the last word on this subject. For my part, I am desperately anxious that some solution should be found because I wish to see Purchase Tax reduced not in this easy-stage manner which the hon. Member for Blackburn, East (Mrs. Castle) anticipates but by one great big shock reduction, because I do not believe that in no other way shall we, at least in the textile industry, get back to the proper conditions in which quality counts.
This gradual reduction will not produce the necessary concentration on quality because it will merely mean that people


will still try to avoid the tax by debasing their quality. However small the amount of tax they have to pay, that will be their attitude; rightly or wrongly, their attitude will be that as long as there is any tax at all, they will try to get underneath the D line by debasing their quality.
It is, therefore, vital that we should administer a psychological shock by removing this tax altogether at some time; and, of course, that cannot be done —at least so the Chancellor suggested in his speech—because of the complaints of the retailers, who, if the tax were taken off by one fell swoop, would have to suffer a very great deal unless some rebate device were produced.
I ask my right hon. Friend to look again not at the ante-dating scheme nor the stock-turn scheme nor any of those schemes which the Hutton Committee have, to my mind rather convincingly, turned down, but at another scheme which they describe on page 34 of their report as a scheme for part of the field only.
As I understand, they suggest that so far as identifiable goods are concerned, it would not be difficult to work a scheme of rebates for goods with serial numbers. They suggest it would be feasible to operate a scheme of rebates, but fear that if that were done the system of identifying goods by serial numbers would spread. I suggest that that is not so much something to fear as something we should hope for, not merely on the grounds of more rebates for honest retailers, but that it is generally a good thing that goods may be identifiable and any defects in quality traceable all the way back so that the people responsible for bad quality may be made to suffer. The more things are identifiable the better for the quality of goods in this country.
They suggest, more implicitly than explicitly, that another disadvantage is that most retailers do not keep sufficient records to enable such a scheme to be operated. It may well be that at present retailers do not keep very good records. The reason for that is because it is not particularly in their advantage to do so. For other tax purposes it is not always a good thing to be very careful about keeping records. But if it were necessary in order to get a rebate, we may be fairly sure that retailers would be induced to keep records.
No one would doubt their competence to do so if they wanted to. The number of people who keep very complicated records of their football pools week by week is evidence of that. If they can keep such complicated arithmetical transactions they are perfectly capable of keeping records. I am sure that our educational system is equal to that.
The only real objection to this partial system is that referred to in paragraph 190 of the report, that because there cannot be justice for all retailers —obviously all retail goods cannot be identified by means of serial numbers— we should not have justice for anyone. I regard that as equality of misery gone mad. It means that because there cannot be justice for all, there shall not be justice for some. I suggest that that is egalitarianism turned on its head. It is quite ridiculous and should be dismissed.
Let us, if we can, start with a system of rebates for identified goods and I think we shall find that identification will spread very rapidly. It may not cover the whole field, but it would cover a substantial part and give retailers the impression that at least this matter was being tackled with the seriousness it deserves.

Mr. Percy Holman: How can the hon. Gentleman say that textile goods may be identifiable? That is utterly impossible and he ought to know it.

Mr. Fletcher-Cooke: The hon. Member says that, but I would refer him to paragraph 189 of the Hutton Committee's Report where they go into the question of numbered tags which could be sewn on numerous textile articles. The hon. Member may think he knows better, but the Hutton Report is quite sure it can be done. If he has the opportunity of speaking I hope the hon. Member will explain why it cannot be done in the way that the Hutton Report says it can be done.

Dr. Horace King: I am sure that the traders of the country will be grateful to my hon. Friend the Member for Blackburn, East (Mrs. Castle) for raising this problem again this year, and I count it a privilege to support the new Clause this year, as I did last year, for I am keenly interested in this question; I was even when the Labour Government were in power.
The hon. Member for the Cities of London and Westminster (Sir H. Webbe) stated with superb clarity the difficulties which confront us in this matter; he gave a very frightening description of the complexity of the problem, but he went on with equally superb clarity to state the economic gravity of the problem so far as it affects the trade of this country and the need to do something about it. His speech contained the nub and heart of this matter.
I want to tackle the question from another point of view. This new Clause seeks to remove an injustice, and to me the fact that it is an injustice is one that weighs more than the fact that it is also a hardship. It is an injustice against the little shopkeepers of this country. It is a fact that every society of retailers has consistently protested against the injustice. It is also a fact that every chamber of commerce in the country is unanimous about the need for the Government to do something about it.
I support the claim of my own chamber of commerce and the little shopkeepers in the constituency which I represent, not because I have any hope of winning their votes, for the bulk of the chamber of commerce and the little shopkeepers in my constituency are ill-advised enough to vote Tory with monotonous regularity. I support them in this matter because I think their case is morally right.
The extent to which the retailers of this country are acting as unpaid tax collectors needs emphasising. The Hutton Committee Report shows that about 75 per cent. of the money taken by tobacconists is on behalf of the Government. I think we may dismiss tobacconists and brewers from our consideration because we understand from the Hutton Report that these trades, at any rate, feel that they do not need any special treatment from the Government, although the report underlines that retail tobacconists find themselves faced to some extent with the general retailers' problems.
Of the money that the retailers in
this country handle, 25 per cent. is collected on behalf of Her Majesty's Government. I do not want to indulge in mere denunciations of the Hutton Committee or of their report, but I do want to make

some serious criticisms of it. It is fair to say, first, that the Hutton Committee claim that the grievances which the retailers
feel were more strongly expressed than is really warranted. They say that the advocates of their case stated it too strongly.
Yet the Hutton Committee Report, again reminding me of the weeping of the Walrus and the Carpenter, says in paragraph 204:
We have a great deal of sympathy with those who have to tie up large sums of money in heavily tax-laden stocks in order to be able to carry on their business. They are liable to hazards arising out of changes in the rates of tax which are outside their own control, and against which their ability to protect themselves may be limited and uncertain.
The Hutton Committee even admit that a trader may be forced out of business through tax reductions.
10.30 p.m.
Surely no stronger moral case can be made out than the Hutton Committee themselves make in that paragraph. They suggest that if a trader is in danger of being forced out of business because he has to meet commitments that he should not morally have to meet, it might be possible to save him by some postponement of Income Tax, but not by foregoing the payments that he has to make for Income Tax purposes. The Hutton Committee also admit that traders who did not profit by Purchase Tax increases but sold their stocks at the old prices were doing what the Government during the war asked them to do, and what was not only their moral duty but their patriotic duty. Yet the Committee suggest in their report that there are compensatory gains; swings and roundabouts.
On the whole, the Hutton Committee tend to minimise the grievances and injustices inflicted on the retailers of this country. They think that a good deal of feeling is due to confusion in the minds of traders over price control and they assume that gains in increased trade on the one hand when Purchase Tax is reduced, and on the other what the traders made—according to their Committee's own argument dishonestly—in selling at high prices when Purchase Tax was imposed, should roughly compensate the traders of this country. The Hutton Committee argue that in equity there ought to be a rebate when Purchase Tax


is reduced just as there ought to be a surcharge when Purchase Tax is increased, but because they cannot work out a scheme which will introduce surcharge and rebate, they decide to recommend neither.
This Committee of the House of Commons should remember, and so should the country, that when Purchase Tax was on the increase the decent business community of the country played the game by their customers, on the whole. I speak only of my own experience of little shopkeepers, who sold goods to their customers at the old price after Purchase Tax was increased. I am certain that I am not alone in that experience. Lots of traders have developed their businesses extensively since the war, and all businesses are now conducted in a period when we can expect not a rise in Purchase Tax but a fall. It is generally agreed all over the country to be a period of falling Purchase Tax. Nobody visualises, short of a national crisis, any return to a period in which there would be a dramatic rise in Purchase Tax from which traders might recoup themselves; so that they have no hope whatever of regaining what they are losing by the present Budgetary reductions in Purchase Tax.
In answer to a Question which I put to him earlier this month the Chancellor estimated the loss which traders will suffer because of the reduction of Purchase Tax as about £13 million this year. It is true that that will be offset by various compensatory gains mentioned in the Hutton Report, but the sum must approach the total estimated by the Chancellor. In common justice we are in honour bound to attempt to meet some of these obligations.
We appreciate too little the fact that shopkeepers are unpaid tax collectors, and that the burden of collecting money for the Government means a lot of extra book-keeping. For the little man it means tying up his small capital in highly expensive stock—highly expensive because he carries the expense of the tax that he is hoping to recoup from the customer when he sells. That is service enough, but if, on top of that, we are going to charge British citizens—not pay them but charge them—for carrying out the onerous duties of tax collectors, I say

quite seriously that the position becomes fantastically unjust.
The Hutton Committee Report states that, on the whole, manufacturers and wholesalers can safeguard themselves to some extent, although they bear a burden. The real problem is the tax which has been paid by the retailer, which he is waiting to collect and which is on the stock he carries in his shop. The Hutton Committee have certain suggestions which they think might alleviate the burden. I do not wish to remind the Committee of them in detail. Some are suggestions for the business interests—of which I am certain the business interests will take notice—for mutual arrangements between wholesaler and retailer. Some of them are fiscal, such as the recommendation that alterations in Purchase Tax be regular and moderate, but they do not meet the moral case which I am arguing tonight.
The main headache remains so far as the trader is concerned. This year the amount involved is £13 million; next year it may be very much more. I realise the Treasury's difficulty. I realise that this matter has been bandied about between the Treasury and the business interests not merely this year and during the sittings of the Hutton Committee but over quite a number of years, as businessmen and the Treasury have looked forward to a reduction in Purchase Tax. Each side is inclined to place too much responsibility for finding a suitable scheme on the shoulders of the other.
I suggest that if the Treasury cannot devise a scheme which will satisfy the business interests it ought to be able to promise to undertake, in this Finance Bill, to set aside a certain sum of money—inside the Budget—which will be placed at the disposal of the business interests, on the undertaking that they work out a scheme which is satisfactory to the Treasury and themselves. If the Treasury could guarantee the money to the business interests, saying, "You do not get it unless you work out a scheme," the retailers and traders would, I believe, finally produce a workable scheme.
Despite the Hutton Committee's luke-warmness about the views put before them by all the trading associations, I believe that right-minded folk will accept the contention of those associations that what


they are asking for is not compensation but the return of their own money. It is money paid in advance for their customers, on the assumption that the taxes were to be a certain amount, and lost because the taxes have been reduced. I admit that this is a complicated and difficult matter, but its complexity should not be used as an excuse to leave this injustice and the mulcting of a small group of citizens where it is today.
I have received a letter from the Pharmaceutical Society, who protest not only against the fact that they cannot recoup themselves for the present reduction in Purchase Tax but also against any reduction of Purchase Tax taking place in future, unless this problem can be solved. They say—as every group of traders say— that it is fantastic to imagine that a position will ever arrive again in which they can recoup themselves for their losses. I would urge the Chancellor to accept this new Clause or, if he cannot, then to indicate to the Committee that, like the Hutton Committee, he is aware of the gravity of the problem, and that he is aware of the injustice suffered by traders; and that, unlike the Hutton Committee, he proposes even now to do something about it.

Mr. Charles Ian Orr-Ewing: In discussing this new Clause, two points are prominent. The first is that hon. Members opposite take some two-and-a-half times as long to express themselves than do my hon. Friends; and the second is that hon. Members in all parts of the Committee are anxious to see the injustice of Purchase Tax lessened. Yet, nobody seems able to put forward a watertight proposal for all classes of goods.
I shall not try to cover every aspect, but I do add my support to what has been said by my hon. Friend the Member for Darwen (Mr. Fletcher-Cooke), and say that if we cannot have justice over the whole field, then let us look to see if, before next year, we cannot do something for positively identifiable goods. It would be a good thing if that class of goods was extended, but I appreciate that the administrative machine would break down at some stage. Perhaps one could rule that positively identifiable goods are those in respect of which the tax exceeds £3 or £5, or some arbitrary sum.
That would at least lessen the injustice for a wide range of domestic appliances, and it is in this range that the retailer finds himself hardest hit. The Hutton Report also suggested a considerable expansion of the sale-or-return scheme, although the disadvantage of that, as I see it, is that it would throw a financial burden, not on the stores or the retailers, but back on the manufacturers. In some ways, hon. Members may say, that would be less of an injustice; but the small manufacturer may well have to carry an enormous financial burden in respect of goods in the pipeline all over the country which are not paid for, while he has had to pay for raw materials, labour, and distribution.
If we are to extend the sale-or-return scheme, ought not some instruction to be issued to the banks to advance money against the requirements of the manufacturing industries for this purpose? I understand that the banks may not provide finance except for defence or export orders, but it would seem that we cannot extend the sale-or-return scheme unless there is some sort of instruction such as I suggest. Unless we do that, we shall be favouring the very big manufacturers who have considerable financial resources, and at the same time handicapping the smaller manufacturers who play such an important part as sub-contractors.

Mr. W. T. Proctor: This is a very serious matter for every trader throughout the country. It is also a serious matter for the House of Commons, because the tax, and the method of gathering it,
are unjust. It is for us to find a solution, because it was this House which imposed the injustice. Almost every chamber of trade has passed resolutions against this injustice. My hon. Friend the Member for Southampton, Test (Dr. King) said that most members of chambers of trade vote Conservative. I do not go so far as that myself. Many traders have become more enlightened.
The Financial Secretary made this problem his own when he was in opposition. He has a moral responsibility, now that he is in a position of power, to find a solution or to apologise to the people whom he deceived when he was in opposition. I am pleased to see the right hon. Member for Blackburn, West (Mr. Assheton) in his place. We had the pleasure of his support on the previous


occasion. I have no doubt that what was described as "intimidation" in the Trade Disputes and Trade Unions Act, 1927, has been applied to him about this matter, but I hope that he will derive from our presence opposite to him the courage to stand up to his Front Bench and say that some solution such as this should be found.
10.45 p.m.
It rests upon hon. Members of the House of Commons to find a solution. When we consider the disabilities under which the traders labour, we find that they are tax gatherers without pay, that they have to pay the tax before they collect it, and then they are in danger of being penalised for the whole of the amount. It is certainly up to us to find a solution. If it were a question of tax evasion, the Treasury would be moving much more swiftly than it is doing on this matter.
The new Clause which we are considering is permissive. Hon. Members opposite ought to give it full support so that we might have the whole matter thoroughly considered and so that the Treasury might be able to do something about it between now and the next Budget. I am certain that large parts of the problem could be removed, even if the whole problem cannot be solved. It is wrong to say that we will do nothing because we cannot do everything.
I hope that the Financial Secretary will tell us that he will use all the brain-power of the Treasury, which is very great, to try to find a solution which will cover the main parts of the problem. The suggestion by one of his hon. Friends for setting up a reserve fund for remedying the rest merits further consideration. The trading community, the Government and the House of Commons must find a means of dealing with this very great hardship which presses upon all those who deal in Purchase Tax goods.

Mr. Assheton: Lest the hon. Member for Eccles (Mr. Proctor) should think that I have been picketed this evening, I intervene to say how much I agree, rather exceptionally, with a good deal of what the hon. Lady the Member for Blackburn, East (Mrs. Castle) said in her speech. I believe the whole Committee was disappointed to read the Hutton Report, but we should not be deterred by

one unsatisfactory report. We made 13 efforts to ascend to the top of Mount Everest, and I see no reason why we should not continue to make efforts to solve this problem. I know that the Chancellor of the Exchequer and the Financial Secretary would be very glad indeed to see it solved.
I believe that if the Chancellor were to give instructions to a very small committee, consisting, say, of three members —Sir Maurice Hutton, who has learned a great deal about the problem; a certain gentleman in the Board of Customs and Excise, who shall be nameless, who knows a great deal about these things and can find solutions for almost every problem if he wants to; and a certain distinguished member of the retail trade, whose name I shall not mention—with instructions to find the best solution to the problem within two months, we should be provided with a very much better solution than anything that we have had up to now. The terms of reference should merely be to find the best solution that they can; that is all. If the Chancellor accepted that suggestion, we should soon get a solution of some sort which might not be perfect but would do something to solve the problem.
The present position is one of great hardship for all retailers. We have all had representations from chambers of trade, and we all want to do what we can to help them. I do not believe that the proposals in the hon. Lady's proposed new Clause are effective and could be put into practice, and I do not believe that it is any use voting for the Clause, but I believe that we can still find some means of solving the problem in due course, and I suggest that the Government be asked to try once again.

Mr. Holman: I should not have intervened in this debate but for the speeches made by the hon. Member for the Cities of London and Westminster (Sir Harold Webbe) and the hon. Member for Darwen (Mr. Fletcher-Cooke). The solution of this matter appears to me to depend on two entirely different factors. In the first place there is the problem of the recession of trade which took place in the three months before the Budget. The second problem is the moral one of whether the retail trade of this country should bear the reductions


and the losses arising from the reduction of Purchase Tax in the subsequent stages, with a view to its ultimate abolition.
Speaking as a member of the Co-operative Party, I would say we have always opposed in toto as a peace-time measure the imposition of Purchase Tax on necessities. We do not mind how high it remains on certain luxury goods. Therefore, we as a House, and as a Committee, have to face this problem: on whose shoulders shall the burden fall as Purchase Tax disappears? In prospect we are telling the retailers of this country that they will have to face a further loss of anything from £40 million to £50 million during the abolition period, or whatever it may be, of Purchase Tax. That is a pretty gloomy and desperate outlook for these many valuable little traders, including, in my own constituency, many in the back streets who are my personal supporters. Their customers of the working class include my supporters—and if any Tory laughs let him remember that my constituency is the only one in this country where the Tory forfeits his deposit.
The main point is, who is to bear that loss? Now, the hon. Member for the Cities of London and Westminster says that if we give them homeopathic doses, and if the Chancellor could introduce at times through the year some small reduction such as 5 per cent., it would be better than the uncertainty which faces the country prior to a Budget. Well, certainly the consumer would never know what was going to happen, so he would not withhold his purchasing at any specific time through uncertainty. That, at least, would be eliminated, and thereby the steadiness of production and distribution would be considerably helped. It is an idea from one aspect which is worth looking at.
On the other hand, there are many trades in this country which would rather be thoroughly stunned, once and for all, than be given a series of blows that leave them at least in a very unhappy and unsteady position. As the Financial Secretary knows, one of those trades is the stationery trade, in which I have a very impartial interest—not a financial interest in any way, but a considerable personal interest—through having once, at a

rather remote stage in my life, been associated with it. There are other trades which would prefer one knock-out blow rather than a series of minor or lesser injuries.
So we have the problem of trying to separate reductions or of abolitions of Purchase Tax from a Budgetary date unless we are prepared to face up to a solution such as the ante-dating solution. Theorists may say that that is no measure of justice, but I say definitely that the bulk of the goods that are subject to Purchase Tax, outside the range of luxuries such as the jewellery trade, the expensive fur trade and so on, have a turnover of between one to four months. In other words retailers of them turn over their capital three or four times a year. If one takes an average of, say, three months' trading, and if the Chancellor would announce on 1st February that any goods on which Purchase Tax was to be reduced would not be subject to tax if supplied after, say, 15th February, that would have an extremely steadying effect on the morale of the retail trade. From what they gained after 15th February in a price including Purchase Tax which might not have to bear tax would compensate them for stocks prior to that date and would, in effect, be a fair three months' average in helping out their stock position.
That may seem very rough and ready but it is a far more just gesture for, say, the retail trade in hardware and non-perishable goods than a continuation of the present position. In fact it would cover most of the goods that are subject to Purchase Tax in the retail shops of this country. Of course when goods are easily or positively identifiable, special arrangements could and should be made, but the range of such goods must of necessity be goods of considerable value, such as motor-cars, gramophones, wireless sets, etc.; goods that can bear specific letters or numbers, where one item can be picked out from another. Goods that can be bought by the gross can never come under that category.
That was why I intervened to say that for the bulk of textiles it is not practicable because, for instance, every pair of socks cannot be numbered. The bulk of textiles are of relatively small value as units and therefore are bought by the dozen or gross. Even if they could bear a specific


range of numbers it would still be necessary to undertake what the hon. Member for the Cities of London and Westminster admitted was impracticable, that is to say, an independent check would have to be made on the last day of the financial year of that class of goods. But, because of their enormous number and miscellaneous character in an ordinary drapery store, it would be impracticable to make such an investigation as such goods are not easily identifiable.
Therefore I plead for either a better solution or for the solution of ante-dating. If there be a better solution, I shall be the keenest supporter of it, from whatever source it may come because we have now reached the stage where it is absolutely vital that we should not say to the retail trade, "In the next few years you will have to bear further losses of £40 or £50 million." That would be cruelty and destructive of enterprise. It would be enough to make the individual ask, "Is it worth while? All our profits for the next three years will probably go west unless we can have a bigger percentage on our turnover." That would be highly undesirable. In other words, why should the insecurity they feel be forced upon the consumer through what I would call an insurance policy against loss— excessively high profits? But that is the sort of thing that must come into the minds of retailers.
11.0 p.m.
I was disappointed to hear the hon. Member for the Cities of London and Westminster suggest that the spokesmen and those who had taken part in formulating the policy of these retail organisations had expressed different views individually. I think that the collective view should be supported because it represents the best possible compromise.
I should say God-speed to the Treasury Bench if they can find a better solution than that put forward by the retail trade organisations. I support this new Clause as a gesture that the Committee intend that something shall be done quickly.

Mr. Frederic Harris: I agree with much that the hon. Member for Blackburn, East (Mrs. Castle) has said, but she was a little unfair when she inferred that we on this side of the Committee were not interested in this matter. I endeavoured to discuss it on the Motion

that Clause 9 stand part of the Bill. It was only when the point was made that this new Clause would be called that the discussion was delayed until now. I can assure the hon. Member that we are deeply interested in this matter.
I hold the same view as I have expressed on previous occasions. Many forget that we should congratulate the Chancellor of the Exchequer on tackling this Purchase Tax problem and on the way in which he did it, which was quite a brilliant move. That is supported by the fact that this year hon. Members have not had nearly so many requests from constituents for reductions on certain products which suffer from Purchase Tax. The problem which follows is the one we are discussing this evening. Everyone agrees that retailers are suffering considerably. Small retailers are suffering as much as £25 to £50 a time which is a burden they cannot afford to bear. There is the prospect that in the years to come they will be called on two or three times to bear similar burdens. A round figure has been mentioned of £13 million.
Interference with trade during January and March has been mentioned. We know that must come about, although I cannot agree with my hon. Friend the Member for the Cities of London and Westminster (Sir H. Webbe) who suggested that even if relief were given it would not do away with the interference. Small traders who knew they would get relief in due course would be prepared to buy their stocks in the normal way so that there would be plenty of stocks for the public to buy quickly.
It is difficult for any hon. Member to accept the present position and it is blatantly unfair to retailers to ask them to stand these tremendous losses. In many ways it can be termed dishonest, because the Treasury are taking tax which the retailers have no chance of collecting. It has been suggested that the retailer should be able to keep up his prices with the Purchase Tax and not reduce them when the Budget proposals are announced. That is a practical trading impossibility.
The Treasury find the answers quickly when they have to collect tax, but they are not so keen to find the answer when tax has to be given back. Clear-cut instructions should be given to the


Treasury to get busy and find the answer. A number of references have been made to the Hutton Report. Many of us were disturbed about the delay in the production of that report and most of us are dissatisfied with it. The National Chambers of Trade have put forward their proposals, and if there was more time one could detail those proposals.
I should like to ask why these proposals were turned down. Auditors' certificates are always used for tax collection and they have been brought into play always when the question of allocations have been queried with traders and manufacturers. If they can be used in those cases, why cannot they be used in such cases as these? Why is this particular problem insurmountable? I suggest that instructions should be given to the Treasury, through the formation of a small committee, to find the answer, I certainly feel the whole position is extremely unsatisfactory and I should like to know what the Government intend to do about it.
I have heard many suggestions from other hon. Members on how this matter could be tackled. The proposition I favour is that proposing that the Chancellor should give rebate on invoices for goods affected by Purchase Tax and purchased two months prior to the Budget date. If traders were in a position, as I feel certain they would be, to provide evidence of purchase two months prior to Budget day of goods affected by Budget tax adjustment, supporting that with an auditor's certificate, I cannot see why the Treasury should not foe called upon to give proper repayment in response to the demands which would be made to them.
I think that the Financial Secretary well knows that most of us in this Committee feel that an answer should be found, and we sincerely hope he will give some words of comfort in this respect.

Mr. Boyd-Carpenter: I well realise that this is a subject in which most of us, at any rate, on this side of the Committee, take a very deep interest, and it is valuable that we should have this debate, apart from the narrow points of the new Clause which the hon. Lady the Member for Blackburn, East (Mrs. Castle) moved. We have certainly had

the opportunity to hear a variety of opinions upon what, as no one who has studied it would dispute, is a very difficult and serious matter. The new Clause itself, as the hon. Lady herself has said, is permissive and not mandatory and it would not necessarily have any effect.
But, I think hon. Members on both sides of the Committee will agree, that it would not be fair to the Committee to accept the gift of powers of this sort unless one thought one had available the means of making use of them. That would not be playing fair with the Committee. I am not clear what is the attitude of the Opposition. The hon. Lady, in moving this new Clause, said, to use her own phraseology, that it was not good enough to accept the present position and added, somewhat curiously, that we, on this side, had created the problem. Whether it be "good enough" or not, the present state of affairs is one in which hon. Members opposite acquiesced during their six years in office. It is not good enough for her, with that background, to use this argument.
But, I am not certain where the Opposition stands today. The lead in this matter, at an earlier stage in the debate, was taken, not by the hon. Lady, the Member for Blackburn, East, but by the right hon. Member for Bishop Auckland (Mr. Dalton). Let me remind the Committee—and particularly hon. Members opposite—what the right hon. Gentleman said on the last day of the Budget debate on this topic:
Then there are all the traders who sell Purchase Tax articles. We have all read the Hutton Report—at any rate, I expect we have. I entirely agree with their main conclusion— it is what I always said when I was at the Treasury—and I hardly thought it necessary to appoint a Committee. I thought it quite clear that they would end by saying that there is no possible administrative means by which we could give a rebate to traders in respect of tax-paid stocks when the level of Purchase Tax on those stocks was reduced. There is no way of doing it and the Hutton Committee Report develops that argument.
Then there is an interruption, and the right hon. Gentleman continues:
The Government have accepted it, and we accept it, and we are all agreed, except the one hon. Member opposite who interrupted. I am convinced that the Committee are right." —[OFFICIAL REPORT, 20th April 1953; Vol. 514, c. 659.]
As far as I know, that is the official view, expressed from the Opposition.


Front Bench by the right hon. Gentleman, who speaks in these debates for the Opposition, and I am bound to say, if I may adopt the language of the hon. Lady, it is just not good enough for hon. Gentlemen opposite to come forward with a great show of indignation in this matter, indignation against the Government for having accepted the Hutton Report, when the right hon. Gentleman who spoke for them in the Budget debate went out of his way not merely to say that the Report was right but to say even that it was a waste of time to appoint a committee, for the matter hardly required investigation.
That is why I made the distinction at the beginning of my speech, for I feel there is really a considerable difference in this matter between the two sides of the Committee. We all realise that this is a problem which has given difficulty and given rise to anxiety for as long as the Purchase Tax itself, that is since 1940. It is a problem which in some degree even before that had been a matter of difficulty in connection with other forms of indirect taxation. It is certainly not a new problem, and it is certainly one which we have taken very seriously. It was because we were concerned with the matter that last summer my right hon. Friend decided to make a further attempt to find a solution and for that reason appointed Sir Maurice Hutton and his colleagues.
I take note of the fact that the right hon. Gentleman did not think it worth pursuing that matter, but we did, in order to have the advantage of an expert and independent investigation into this very thorny problem. For that purpose a Committee was appointed which, whatever hon. Gentlemen may say about its findings, was not only wholly independent but was composed of men with very considerable experience of all aspects of business. The Chairman was a man of great distinction, with very considerable experience in industry, as well as having held responsible positions under the Government during the war and since. The Committee also included a retailer, a wholesaler, a manufacturer, an accountant and an economist. It was, in fact, not only independent, but deliberately composed of people with considerable practical business experience.
That Committee went most exhaustively into the whole subject. They heard evidence from 149 individuals or trade bodies. They had evidence submitted in writing, and they spent some months in investigating the matter. Indeed, they took their duties so thoroughly and seriously that my hon. Friend the Member for Croydon, North (Mr. Frederic Harris) was getting a little worried about when they would report. There is no doubt that this experienced and independent body did go into this question thoroughly, and came to the conclusion which we know.
I am not arguing that the findings of any committee, however authoritative or independent, are conclusive. I have never adopted the view that anybody is infallible—not even a committee—but the fact that after these years a body of this sort after such prolonged consideration, came to these conclusions, is a fact that cannot very easily be brushed aside. Whether it is conclusive or not, it is a fact and a factor to which sensible people must give weight in making up their minds about what is right in this matter. That is the first factor—the new factor since we last discussed the matter last year.
11.15 p.m.
Let me deal, in passing, with the suggestion which was made only, I think, by the hon. Lady the Member for Blackburn, East that my right hon. Friend had made up his mind on this subject with excessive rapidity. I think the hon. Lady was genuinely misled by the fact that the report was presented to Parliament in March. In fact, as she was good enough to give way to allow me to point out in the course of her speech, the Report was completed and signed on 4th February and was in my right hon. Friend's hands on that day. There was a matter, therefore, of some weeks before the announcement of its acceptance was made, and I hope that I do not need to assure the Committee that serious and sincere consideration was given to it. I mention that because it is quite easy to misunderstand, as the hon. Lady manifestly did, the relevant dates and accuse the Government of undue precipitancy in making up their minds. If I may add, that is a somewhat unusual charge from the benches opposite.
The essence of the report as my hon. Friend the Member for Hendon, North (Mr. C. I. Orr-Ewing) pointed out in his very clear observations, is that a scheme of rebates, though workable in respect of a few easily identifiable articles, is not workable generally, and the Committee mobilised in paragraph 189 of the report very clear arguments as to the difficulties which would follow from applying a system of rebates to that category of goods and not to a large number of goods not in that category.
I do not want to go over the ground at undue length because my hon. Friend the Member for the Cities of London and Westminster (Sir H. Webbe) dealt, I thought with extreme clarity, with the difficulties that arise on the different schemes. But the point that does emerge from the report is the attitude of the Committee itself. It is perfectly clear, as one of my hon. Friends said, that the Committee not only fully understood the difficulties for the trading community in regard to Purchase Tax but were extremely anxious to help by way of rebates.
It is not without significance that, notwithstanding that clear predisposition, they found, for the reasons set out at length in paragraph 189 and elsewhere, that a system of rebates applicable only to a limited number of goods would be inequitable between trader and trader and wrong in its application. They make the further point, which was, I must confess, a new point to me when I read the report, that there was some argument, if a system of rebates was applied, when tax was decreased, for having a system of surcharge when tax was increased, and if such a balanced proposal were operated the difficulty of applying it over part of the field was even greater.
At any rate, we start with the Committee—which apparently, if it had any bias, was a bias in favour of these schemes—being forced by the logic of the facts to take the view that to operate such schemes was not possible. But even then the Committee did evince its concern about this matter by the recommendations which they have made for at least mitigating the weight of the injury which can be done in these circumstances.
In the first place there is the recommendation that Purchase Tax changes

should be moderate and that violent fluctuations should not be made. A clear indication of the Government's concern is our acceptance of the Recommendation to
keep within that limit the trouble which can be effected. In last year's debates, the hon. Lady the Member for Blackburn, East referred to the duty of the Government to take steps in the direction of rebates. She complained that we should not "play about" with Purchase Tax, by which I understood her to mean raising it and lowering it in a somewhat haphazard manner.
Whether or not that be a correct description of the way Purchase Tax was operated under the late Administration, it is clear, from our acceptance of the Hutton Committee's recommendation, that playing about with Purchase Tax is no part of the proposals of the present Administration. Indeed on more than one occasion during the debates on Purchase Tax it was remarked that certain proposals had to be considered in the light of our acceptance of the Hutton Committee's recommendation that changes in Purchase Tax should be moderate.
I do not want to enter into the thorny and difficult subject of the exact extent of the trouble which arises when Purchase Tax is reduced. While it is a matter of simple mathematical calculation that the reduction of Purchase Tax imposes a loss upon the holders of tax-paid stocks, so far as that transaction can be taken by itself, goods as a result of that reduction can be replaced at lower cost and generally the turnover is increased, to the benefit, among others, of the retailer. I am not going to make calculations in any particular case as to whether the benefit countervails the injury, but it is right that we should realise that it is part and parcel of the transaction of reducing Purchase Tax that there should be some contribution to the well being of the retailer and of other people.
Indeed, that view is accepted to a very large extent by some sections of retailers. When I received a deputation a little time ago from the stationery trade, who are pressing for the complete abolition of Purchase Tax, I asked the representative of the stationery retailers whether, in view of the Government's acceptance of the Hutton Report, he still pressed for total abolition. He replied that even with no rebates his trade would still welcome


complete abolition. I understand that similar views are held by some representatives of the
jewellery trade. It is as well to reflect upon the views of experienced traders that the benefit to be gained by a reduction
in the rates of tax can in certain circumstances, countervail the loss that they suffer when the rate of tax is reduced. That is the problem as we see it. I must now deal with one or two specific matters that were raised.
My hon. Friend the Member for the Cities of London and Westminster raised the extremely interesting question of the possibility of alterations of Purchase Tax by statutory instrument other than in the Budget. As he is no doubt aware, power to effect such alteration exists in the Finance Act, 1948. Hon. Members who have studied the present Bill will see that further powers in that direction are being sought in Clause 9 (2). This question of making major changes outside the Budget involves a very difficult balance of considerations. If it is done there is a risk that instead of uncertainty in the earlier part of the year there will be uncertainty throughout the whole year, and that is not a particularly desirable state of affairs.
There is also the consideration that if some of the Purchase Tax agitation arose in a non-Budget season expectations might be raised of an early change, with unfortunate consequences to the trade concerned. On the other hand, there is a great deal to be said for the very clear and moderate way in which my hon. Friend stated the difficulties that arise, under the present system, in the early part of the year, and Her Majesty's Government are very much concerned with the effect on industrial production during the earlier months as a result of the natural reluctance of retailers to carry more than minimum stocks in present circumstances. That is a very real problem, of which I can assure the Committee we are only too well aware.

Mr. J. Hudson: What are the Government going to do?

Mr. Boyd-Carpenter: The hon. Member for Ealing, North (Mr. J. Hudson) supported his Government for six years, so his question comes from the heart.
The position has been made in one sense more clear and in one sense more difficult by the fact to which I have

referred, that after a number of years independent and expert investigation has found a real difficulty in every proposal. That is a factor which we are all bound to face frankly. Ministers will certainly still be prepared to consider suggestions or proposals and will themselves try to seek solutions if solutions can be found, but it would be misleading the Committee to suggest that in the light of the investigation we have just had it is going to be easy to find such a solution. The facts of the problem are clearly in our minds. I can assure my hon. Friends that our minds are not closed and that we are quite prepared to consider frankly and honestly such proposals as from time to time may be put to us, and to apply our own capacities to this extremely difficult problem.
I hope that what I have said indicates that my right hon. Friend realises not only the difficulties which arise from the present system but the strong, genuine, sincere and understandable feelings to which those facts give rise. I would equally suggest that this is not a matter that can be resolved only by strength of feeling; it can only be resolved, if at all, by strength of thought, and I would commend to my hon. Friends who feel—as some of them have expressed in clear and forceful language—that more could still be done, that whenever they think fit they should put to my right hon. Friend such suggestions as they may have. I repeat the assurance that my right hon. Friend's mind is not closed and that, as is always the case with him, honest suggestions will be honestly and carefully considered; but it would be failing in frankness to the Committee, in view of what I have said about the facts of the matter, if we were to take the easy course and accept the suggestions made in the hon. Lady's new Clause.
I do not think any hon. Member could commend or support the suggestion that we should accept powers when we have indicated that, as at present advised, we have no proper use to which to put them. That would not be a right solution. I do not know what is the attitude of the Opposition in this matter. The right hon. Member for Bishop Auckland (Mr. Dalton), whose speech I have quoted, is apparently not with us. Whether the leadership is now in the hands of the hon. Lady I do not know, but I hope that hon. Members from all sections of


the Committee will appreciate that this is not a matter to be resolved by forceful controversy in one direction or another. It is a matter which calls for the most careful thought, and that is what we on this side of the Committee propose to give it.

11.30 p.m.

Mr. Jay: I think that this debate has made perfectly clear that this is a subject which gives the Committee, and the public outside, a great deal of real anxiety; and it is a pity that the Financial Secretary should have introduced party feeling into the beginning and end of his speech. There are genuine differences of opinion all over the Committee; there are differences between front and back benches, and this debate has made clear that we are divided on the question of whether any broad scheme for solving this problem is practical. But what we are united on is that the Government should make some further effort, with all the resources at their disposal, to find a solution.
There is a particular responsibility on the present Government to make that effort, because in some respects, as was said by my hon. Friend the Member for Blackburn, East (Mrs. Castle), the Government have actually made the situation worse. The Chancellor has accepted the Hutton Report, and so far as industry knows, there will be no compensation next year. Secondly, he has done what we never did, in that, since the Budget debate, he has given a broad hint to industry that there will be further reductions in Purchase Tax in next year's Budget. The right hon. Gentleman hinted at it a fortnight ago in this Committee, and surely it is clear that if one tells the traders that there is to be no compensation, and broadly hints that there will be more reductions in Purchase Tax, the dislocation in trade during the months immediately before the Budget will be at the maximum, and worse than ever before.
I suggest that it is unwise to give this broad hint about what one is going to do in the next Budget, and it is all the worse when this problem about stocks exists. It is for the Government to continue to hunt round for a solution. Admittedly, the Financial Secretary offered a chink of light at the end of his remarks when he said the Government were to go on

thinking about it. But I would make a slightly more ambitious proposal than that. If the Chancellor does not like the suggestion put forward by his right hon. Friend the Member for Blackburn, West (Mr. Assheton) may I suggest this? Are the Government willing to undertake that they will invite the retail trade organisations to put forward new proposals, taking into account what the Hutton Report has said, with the promise that the Government will carefully examine any proposals and, if necessary, have discussions with traders' organisations about them? The Government should at least be willing to do that, and, if they are so willing, we shall have made some little progress.

Mr. Godfrey Nicholson: That has already been done.

Mr. Jay: I know that the traders' organisations have put forward proposals, but what I suggest is that the Government should invite new suggestions, based on the findings of the Hutton Committee. In view of the obvious desire of everybody to find some solution, we shall reserve the right to raise the matter again on Report stage, and urge the Government to do all that they possibly can.

Question put, and negatived.

Mr. Gaitskell: I beg to move, "That the Chairman do report Progress, and ask leave to sit again."
At this hour we ought to have a clear understanding from the Chancellor as to how far we are going tonight. I realise that he may feel that, as we have taken only two new Clauses, it is not a great deal of progress in one day, but, on the other hand, both Clauses have been concerned with matters of great importance and of great concern to many hon. Members. Therefore, he should not deduce that exactly the same average time will be taken on all the other new Clauses which you select, Sir Charles.
Since it appears likely that we shall have to go fairly late tomorrow night anyhow as the Chancellor intends, as he has told us, to finish the new Clauses, I urge that it might be better to wait until tomorrow before we approach the next new Clause so that we can discuss it at a more reasonable hour. One can see from the number of names attached to it that it is one of considerable interest


to many hon. Members. It raises matters of taxation which concern not only the hon. Members who are particularly closely associated with it but a number of others as well. It illustrates a problem which is a very real one. In all the circumstances, I hope that the Chancellor will agree that we should adjourn the debate this evening on the understanding, which I fully realise, that it will almost certainly be necessary to go rather late tomorrow night.

Mr. R. A. Butler: I agree with the right hon. Gentleman that we have obtained the two main debates on the new Clauses, namely, those dealing with cinemas and retail stocks. In the circumstances, I do not think we need keep the Committee late tonight. But the right hon. Gentleman is on record, and I am on record, as saying that we must finish the new Clauses and the Committee stage of the Bill tomorrow, whatever hour we may have to sit to. On that understanding we need not sit later tonight.
If some hon. Gentlemen are as brief as they are sweet tomorrow, I do not think we need sit too late. It all depends on the length of the interventions of hon. Members. If we are short, I believe that we can finish at a reasonable hour. In the circumstances, I do not oppose the right hon. Gentleman's Motion.

Committee report Progress; to sit again Tomorrow.

KOREAN PEACE (ECONOMIC PROBLEMS)

Motion made, and Question proposed, "That this House do now adjourn"— [Major Conant.]

11.39 p.m.

Mr. Cyril Osborne: I apologise for raising this matter so late in the evening, but I do so with some confidence because of the urgency of the problem and because it is so topical. I wish to raise the question of the economic consequences of a possible peace in Korea, and I wish to ask what plans the Government have in mind to meet the problems which will arise.
Despite the incredible folly of the President of the South Korean Republic,

most people hope that we shall very soon see an end of the cold war and that we shall reach a period when the East and West have learned to live together. I think we can say with confidence that not only in this country but in the United States of America, where the burden of the Korean war has been so heavy, the ordinary people want to see an end of the strain, both in blood and materials, that Korea has imposed on them.
The question I want to put is this: if peace comes, can a slump be far behind? And if so, what are the Government doing about it? Already, Mr. Deputy-Speaker, the possible peace is casting its shadows across the industry, the markets and the trades of the whole world. I should like to give my hon. Friend three examples. In the American journal "Time" only last week, under the heading "Economy," it said this:
When the first Korean truce rumours spread through Wall Street last week Stock prices suffered the worst break in two months.
It goes on to ask this question:
What will peace do to the United States business? Where does the U.S. economy stand? Banker Marriner Eccles, onetime chairman of the Federal Reserve Board, had one answer: 'We're at the top of our boom now, and there are heavy deflationary pressures. Shortages are giving way to surpluses. More consumer goods will be produced than are sold. The home building peak has passed…. Exports are falling off rapidly'
I want to ask: what is peace going to do to British industry? What may it do to the policy of full employment? What is it going to do to the size of the wage packets of the people in our own industry?
I give another example. The "Evening Standard" of last Tuesday, under their City heading, said this—or the City Editor said:
I hear that more than 1,000,000 tons of tanker shipping is now laid-up in the world's backwaters as a result of the prolonged slump in tanker freight rates. A truce in Korea could result in a further score or so being put on a care-and-maintenance basis.
Here is the last quotation that I should like to give as showing the shadows that are falling not only in our own country but in the countries in the Far East, for which we in this Parliament have considerable responsibility. At the international labour conference in Geneva


last week, "The Times" of last Wednesday reports:
Representatives of the Governments of Pakistan, Ceylon and Japan today appealed at the international labour conference for more consideration of their mounting difficulties by the western countries. Mr. Malik, Pakistan Minister of Labour, said that stability in the advanced countries was achieved at the cost of the raw material producing countries, 'which have gone deeper in the abyss of poverty, from which mass discontent and the terrible forces that threaten the peace of the world are raising their heads'.
I ask my hon. Friend, therefore, what, if peace comes, as we all hope, and as we all want it to, are to be the economic effects in this country, and what plans have the Government to meet the problems that will arise?
There are men in our country and in America who believe that each country should "go it alone," and face problems on their own. I do not believe that that is possible. I believe that this country is tied irrevocably, as it were, to the American apron strings. In this country we have what I should like to call
"the Beaverbrook—Bevanite axis "—a strange combination, but I believe that that axis, which is always talking about a third world force, of a Britain that could be, as it were, a balancing force between the Russians and the Americans, provides no solution for us.
My hon. Friend knows quite well the American economy consumes such a large proportion of the world's raw materials, and produces so much of the world's goods, that if there is a boom in America the whole world prospers; but if there is a slump in America the whole world will suffer. And it is because I fear that peace in Korea will, for a period, bring a slump in the American economy that will reflect itself in this country, that I am asking him for a statement that will reassure not only the business men of this country but the trade union leaders and those engaged in industry as a whole.
The "Economist" on 28th March published a remarkable article with a headline "If America Slumps." In that article, which I am sure my hon. Friend has read, it is stated:
… a recession of demand in America, even of the very low order of 2 or 3 per cent... would usher in an economic crisis that would reverberate round the world.

For example, the last time before the war when there was a slump in the American economy was in 1938—
In that year, the real value of America's gross national product fell by 4 per cent... and its money value fell by 6 per cent. The result was that the total value of American imports fell by 36 per cent., the value of its imports from Britain fell by 41 per cent. and from the overseas sterling area by 50 per cent.
That was the result of a 2–4 per cent. fall in American productivity. What would be the effect if there were anything like the slump that America had in 1929, when her output fell by about 40 per cent.? I put it to my hon. Friend that we have no hope of solving the problems that may arise as the result of a Korean peace unless, first and foremost, there is the closest of understanding, cooperation and working between the American economy and our own. We cannot hope to solve the problem by ourselves.
I want to give my hon. Friend four examples of where I think trouble could easily arise. Before the war American cotton was priced at 5d. a pound. In the Korean boom it shot up to 45d. a pound. Today it is back to 30d. Wool tops, in which Australia is so closely interested, were 25d. prewar and in the Korean boom period shot up to 348d. and are now back to 170d. Contrast this with
the two commodities upon which our Colonial Empire so largely depends. Rubber, before the war, was 8d. a pound. It shot up to 73d. and it is now down to only 20d.
If there were any slackening in the demand for rubber, to what price would rubber sink? I am told that the rock-bottom average economic price for rubber is about 2s. a pound. It is selling today at only Is. 8d. So that if there is a falling off in the demand for rubber as the result of peace in Korea, and if no joint steps are taken by an Anglo-American board to support that price, there will be even lower wages paid in the Far East, more estates may have to close down, there will be more unemployment, and we are likely to lose in peace what we fought a war to avoid.
In the case of tin, before the war the price was £229 a ton. It shot up to £1,470. It is now back to £675. In the case of these two commodities the price of one is 2½ times the pre-war price


and the other is three times the pre-war price. And if we remember that the value of sterling has fallen to one-third of its pre-war value, rubber is already lower than it should be, and tin is wobbling on the bottom price.
If, as the result of peace in Korea, the demand for these basic commodities for armament purposes slackens, then I can see such ruin in our overseas dependencies and in the economies of our friends in the Far East as would create tremendous political problems. Last year there was about 1,815,000 tons of rubber produced, and America consumed about 454,000 tons. But during the same year America consumed 807,000 tons of synthetic rubber. If America considered it economically necessary to consume more synthetic and less natural rubber the effect on the price of natural rubber would be considerable, and the effect on the rubber-producing areas for which we are responsible would be great.
I wish to know whether any agreements have been arrived at with America on these problems. Is discussion taking place now? Tin and rubber are our greatest dollar earners. The very solvency of sterling depends on the prices we obtain for those two commodities. It would be tragic if we waited until peace came and then started to discuss these problems. We have to face them now. A statement by this Government and by America that the problems which may arise are being faced now would give assurance to those who might be affected and help to minimise the slump which might come.
What agreement has been arrived at regarding stockpiling? Shall we continue to buy these strategic stockpiling materials when peace comes to Korea? Has any limit been set to the amount of stockpiling? I hope there will not be a kind of Korea demand in reverse, a competitive desire to sell on the part of America and ourselves. If that happens there will be the world's greatest economic and commercial slump.
Is there continuous discussions between the American Government and ourselves on these problems? When I was in the United States and Canada last year I asked these questions of leaders of Administrations in both countries, and was told that they were bridges which would be crossed when we arrived at

them. I think we have arrived at them now, and I should like to have some assurance that we know how to cross them. What plans have been made for men in the engineering industry who will be temporarily unemployed when we switch from making guns to making prambulators and other things? It may take from six to 12 months to re-jig and re-tool the engineering works. Shall we find ourselves competing with America in the sale of peace-time commodities for neutral markets?
At the same time, when commodity markets will be so uncertain and when the engineering industry, upon which the prosperity of both countries depends so largely, will be in a state of flux, we shall be expecting the men who are serving in the Forces to be slowly released. What plans are being made to see that these men will have jobs to come back to? To leave it until the last moment would be a tragedy for them and the country.
I realise that these are great, overriding and difficult problems. I realise, too, that we can not solve the problems by ourselves. I realise fully that the best hope for us is to have as great as possible agreement with the American Government. I ask my hon. Friend if he can, at least, to make a statement that could go to the men whose jobs may be involved, to the men whose industries may be upset, and to the whole country, that when peace does come, as we all hope it will, that the problems it will bring have been studied beforehand and that the Government have measures to meet them. I hope that my hon. Friend will be able to give me some reassurance on this point.

11.56 p.m.

Major H. Legge-Bourke: I shall speak for only a few minutes, but I hope that no one will assume from the remarks of my hon. Friend, the Member for Louth (Mr. Osborne), that he is not just as anxious for peace in Korea as I am. His remarks might be misconstrued outside the House, and I know that he is the last person who wants the war in Korea to go on for one day longer than it has to. I must say that some of the quotations he read from some of the American newspapers made me think of the time when I read them, and I thought that if I had been a G.I. on


leave I should have felt like walking down Wall Street and trying to frighten people with something else than a peace scare. The phrase "peace scare" is a horrible one and I hope that it will never re-emerge. We all want peace as soon as possible.
As to the solution to the big problems, I would say that if peace in Korea happened very suddenly, and perhaps sooner than we can dare expect at the moment, that would force H.M. Government to do something which we have been asking them to do for some time. That is, to take unilateral action on the General Agreement on Tariffs and Trade, It would make it absolutely imperative for this country to get together with the Commonwealth and Empire and make sure that the means by which we saved ourselves in the 1930s should be used again to save ourselves in the very difficult position which we should undoubtedly be in. That is all I propose to say, but I hope that my hon. Friend the Economic Secretary will be able to give my hon. Friend the Member for Louth some assurance along these lines.

11.59 p.m.

The Economic Secretary to the Treasury (Mr. R. Maudling): My hon. Friend the Member for Louth (Mr. Osborne) has dealt with a wide range of most important subjects, and I am sure that he will not expect me to answer them in the course of an Adjournment Debate. I should like to assure him that I share his belief in the great importance of all the matters he has raised. He was very right in pointing out the importance of the Government exercising forethought and foresight in these matters and recognising that, when adjustments in the cold war to real peace come, they will be marked by considerable readjustment in our economic difficulties and the more preparations we can make the better.
It is interesting to recall, as he did, how in the past, there have been comparatively small declines in the total of American economic activity which have been reflected in very big swings in the demand for sterling area products. At the same time it is most important that we should not allow ourselves to be mesmerized by the problems that may arise. We must not be frightened at the prospect of peace,

because I am convinced there is not the slightest reason to be frightened, if we face the problems in good time and apply the deeply developed techniques which we possess today. When we try to find analogies in what happened in the 1930's, we leave out of account the great development in the knowledge, science and techniques now available to Governments in handling these complicated and difficult economic problems.
I should like to deal specifically with the question of raw materials and stockpiles. The stockpiles of the United States, and also of this country, have been based on the concept of long-term difficulties, and not on short-term requirements, and the only effect of the Korean War on stockpiling policy has been to prolong to some extent the period over which it has had to take place, and possibly to hold it up by withdrawals for the needs of the day-to-day campaign. But I agree with my hon. Friend about the importance of avoiding any sudden realisation of stockpiles, and the great effect that would have on trade. Indeed, the United States Public Law No. 520 provides that no releases shall be made from stockpiling without the express approval of Congress, after six months prior notice. That does show that the United States Government are well aware of the great importance of not throwing stockpiles on the market and disrupting trade and production throughout the country.
It is equally true, quite apart from any question of realisation of stockpiling, that the steady tailing off of purchases which have done much to maintain the level of commodity prices, combined with the prospect of lower expenditure on armaments generally, will be liable to have a considerable effect on commodity prices. The Government attach the greatest possible importance to commodity policy and the level of prices, subjects which so rightly exercise the hon. Gentleman's mind. If he studies once again the communiqué issued after the Commonwealth Economic Conference at the beginning of this year, which produced our plan for future economic policy and development, he will see there is a specific passage on the question of commodity policy where we stress that instability in commodity prices is a thoroughly bad thing and contrary to our


interests, and also that we consider that excessively low prices are equally bad in the long run for both consumer and producer.
Therefore we consider it important to avoid excessive fluctuation. On the other hand, we do not believe it is possible to dogmatise. It is not possible to lay down a common policy for all commodities. We believe that we must move pragmatically and study each commodity one by one. We have been concerned that there should be in being the machinery whereby commodity conferences could be called at very short notice if circumstances demanded. There was an international understanding in 1946 embodied in the Havana Charter. Although it has not been ratified it has been given separate international authority, and machinery does exist to negotiate agreements.
There are international study groups for most of the major commodities— wool, rubber, tin and cotton—and the tin group is meeting at this moment to study the world tin position and to take account of the relationship between possible demand in the future and possible supplies. I can assure my hon. Friend that we are well aware of the dangers of fluctuations arising in future in the prices of commodities, and that we do intend to maintain the development of machinery which makes possible urgent practical action by international agreement for particular commodities when problems of this kind arise.
To turn to a slightly more general question, I do not think my hon. Friend can have seen the report of a recent speech by the President of the United States. I should like to quote his words to this extent:

This Government"—
speaking of the United States Government—
is ready to ask its people to join with all nations in devoting a substantial percentage of the savings achieved by disarmament to a fund for world aid and reconstruction.
That is a most delightful statement and indicates that the American authorities are aware of the importance of providing some substitute for defence demand when defence demand tails off.
I do not see why we should fear this eventuality. Far from it; we should welcome it with open arms. If and when the defence demand dries up there is an indefinite demand throughout the world for things that we can do, for factories, capital equipment and so on. There is an indefinite demand for things needed by mankind throughout the world to improve mankind's lot on this earth. Our problem as statesmen, in America, the United Kingdom and throughout the world, is to ensure that we get the machinery so that during the transition to peace and after, there shall not be any down-turn in demand which will disrupt industry and destroy confidence.
I thank my hon. Friend for raising this subject and giving me a chance to say a word or two on Her Majesty's Government's attitude and to assure him that we share his view of the importance of this matter. We are confident of the capacity of the free world to deal with this problem, as with all other problems, but we recognise that it can only be done by the exercise in good time of forethought, intelligence and application.

Adjourned accordingly at Seven Minutes past Twelve o'Clock a.m.